Earlier quoted context omitted.
You would've bought Russian stock in 1916?
Not in 1916 but why not in 1890 ?
Because the country just got over serfdom, corruption was rampant, and its imperial ambitions were too big for its boots?
Investing Returns on the S&P500
121–130 of 357 posts
Re: Investing Returns on the S&P500
#122Earlier quoted context omitted.
1. If you're right 51% of the time when you invest you're going to get rich. Unfortunately the odds of you being right 51% of the time are incredibly low. 2. Heed Rule #1, and put most (if not all) of your money in broad market ETFs. 3. If you DO decide to actively invest, think about your strengths both in terms of character and industry knowledge and play to those. I don't know jack about healthcare and have had my…
> If you're right 51% of the time when you invest you're going to get rich. Sorry, but this is completely incorrect. The approximate formula for success in investing or trading is "percentage right" * "average win profit" - "percentage wrong" * "average loss" = overall profit. Many traders are correct only 20% of the time (I'm looking at you, stock options traders) but make fortunes because they understand this formu…
Yes, and you can also be be right most of the time, and have below market returns because of transaction costs or management fees.
Re: Investing Returns on the S&P500
#123Does the stock data used suffer from Surviver bias? That is a free download of historical data that lacks failing, delisted companies of the past.
Yes sometimes companies are delisted from the S&P500, but if you invest in an S&P500 index fund , then your investment is also automatically adjusted to remove that company. Which makes me think: with index funds becoming more and more popular, should we see bigger and bigger crashes of stocks when they are removed from an index?
And then that index fund has to take the loss that comes with having bought a stock that failed and sell at a loss, while not capturing the gains of stocks that got big enough to make it on the index.
Shouldn't the index "return" thus diverge from the return of an actual index fund in practice given enough years?
Re: Investing Returns on the S&P500
#124Warren Buffett bet $1mm that S&P500 will outperform a hedge fund over a 10 year period.[1] That's good enough for me, I'll follow the oracle. [1] http://longbets.org/362/
> bet $1mm that S&P500 will outperform a hedge fund over a 10 year period.
He's actually betting against a portfolio of hedge funds going as far as to include fund of funds (typically a terrible bet). I assume he is only using US Equity hedge funds too?
I'd be interested to see the distribution of individual funds in his portfolio that beat the S&P vs those that didn't. In general though these numbers have huge survivor bias since numbers are self reporting and ignore dead funds.
It is also worth noting that the index went from 1400 to 900 over the course of 2008. So when he started the bet is clearly going to be relevant. You could of course repeat the experiment using every possible start date from, say, 2000 - though your portfolio of hedge funds will be hard to construct.
He is clearly winning, but it seems like an odd question to ask.
Re: Investing Returns on the S&P500
#125The stock market isn't some immutable thing. It's the product of economic and social forces, the share of income given to capital and labor, international politics, etc. Basically stocks are a convenience for rentiers that the little people are allowed to access. There's no reason to expect the social forces that underly market returns will deliver the same returns in the future.
>There's no reason to expect the social forces that underly market returns will deliver the same returns in the future.
Except human nature is the same, economics is the same.
Re: Investing Returns on the S&P500
#126Earlier quoted context omitted.
65.67% vs. 21.87% returns so far (net after fees) http://fortune.com/2016/05/11/warren-buffett-hedge-fund-bet/ Almost impossible for Warren to lose at this point.
Whoa, thanks. I would have definitely taken the losing side of the bet.
His bet is on returns net of fees. There are some theories that any alpha generated by a fund is eventually just captured in the fee structure.
Re: Investing Returns on the S&P500
#127If you want to know the returns for the next 7 years, GMO has quite a good track record, based on ratios being mean reverting http://www.gurufocus.com/news/349958/how-to-play-gmos-latest...
Re: Investing Returns on the S&P500
#128The stock market isn't some immutable thing. It's the product of economic and social forces, the share of income given to capital and labor, international politics, etc. Basically stocks are a convenience for rentiers that the little people are allowed to access. There's no reason to expect the social forces that underly market returns will deliver the same returns in the future.
>There's no reason to expect the social forces that underly market returns will deliver the same returns in the future. Except human nature is the same, economics is the same.
Except that people didn't live under a capitalist economic system with stock exchanges, shares, and private property for the 10000 years of settled urban existence before the 18th century, so, yeah -- apparently "economics is the same" isn't true.
Re: Investing Returns on the S&P500
#129Earlier quoted context omitted.
65.67% vs. 21.87% returns so far (net after fees) http://fortune.com/2016/05/11/warren-buffett-hedge-fund-bet/ Almost impossible for Warren to lose at this point.
Hedge funds are downstream of money with performance-driven interest. Markets (the major players that skew the averages) are downstream of banks who use money the Fed's pay the interest on. His gamble is that the elite would rather give the market unlimited welfare a la Japan to keep the signals of valid global demand alive. The Fed will not allow a correction... mostly for political reasons.
I don't think that was the gamble when Buffet made the bet. The gamble then was, in ten years of completely unknown (at the time) market conditions, the S&P 500 will outperform hedge funds.
If you picked a different 10 years (say, 199X-200X or 200X-201X), I suspect that Buffet wins for most values of X, but I have not checked.
Re: Investing Returns on the S&P500
#130I don't think it is fair to say that next 100 years will be same as last 100 years: 1. GDP growth is not as high as it used to be anywhere in developed world: http://www.oecd.org/std/productivity-stats/oecd-compendium-o... 2. USA is superpower at the peak. Plenty of other stock market economies hasn't been so successful. E.g. Argentina used to be one of the richest country in the world. Investing in history is easy,…
A tuyere is a weird, tough, heat proof, somewhat hard to make (depending on your local technological level) compressed air nozzle. If there's a steel mill blast furnace nearby, you can make a fat stack of cash making and selling tuyeres. Its kind of a specialists metalworking job in that an idiot can make one that doesn't last and falls apart at the worst possible time causing thousands of dollars of missed productio…
How are you efficiently saving for retirement? There are markets for real estate and gov&corp bonds too!