Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
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Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#2If anyone finds this surprising I'd highly recommend reading 'Smarter Investing' by Tim Hale, which does a great job of advocating for index-based positions. With the exception of C, those fund-of-funds have done incredibly badly.
One of the interesting things Tim discusses is that this poor performance compared to market tends to make investors second-guess their investments (often for good reason looking at those returns), and buy into the fund that did well last year instead. So you're also getting into a sell-low-buy-high routine.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#3Reminds me a little of traffic. Yesterday I was cruising down the highway in the leftmost lane, going about 80 with a line of other cars. The other two lanes were actually more clear, but cars were going much slower.
I notice this one car, weaving in and out of traffic in these two lanes, trying desperately to get ahead, constantly cutting people off. They did this for 40 miles, weaving in and out, sometimes getting ahead of me by quite a bit, sometimes falling behind.
If they had just stayed in the left lane and cruised, they would have arrived at their destination at exactly the same time.
My point is, it seems to be human nature to be bad at estimating long term averages, whether it be stock picks or just driving down the road. Checkout lanes are another example that comes to mind.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#4For context the losers argument is that Buffet picked a good team in a good period and he would have a good chance in a second cycle. https://www.bloomberg.com/view/articles/2017-05-03/why-i-los....
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#5Reminds me a little of traffic. Yesterday I was cruising down the highway in the leftmost lane, going about 80 with a line of other cars. The other two lanes were actually more clear, but cars were going much slower. I notice this one car, weaving in and out of traffic in these two lanes, trying desperately to get ahead, constantly cutting people off. They did this for 40 miles, weaving in and out, sometimes getting…
I think the weaving in and out behavior can be explained in some part by the boredom of just cruising in a single lane for miles and miles.
That being said, downvoted because the traffic analogy was very tangential to the point at hand and would only serve to derail conversation.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#6I feel like there's some cognitive dissonance surrounding hedge funds in popular culture -- on the one hand you have people saying that any outsized short-term gains seen by hedge funds are the result of some selection/survivorship bias, and on the other hand you have people saying that any outsized returns are the result of illegal privileged information (see the TV show 'Billions').
I realize that there are enough hedge funds out there that both things can be happening. It's too bad that there's so little visibility into the industry, it would be fascinating to see some kind of hedge fund taxonomy.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#7Reminds me a little of traffic. Yesterday I was cruising down the highway in the leftmost lane, going about 80 with a line of other cars. The other two lanes were actually more clear, but cars were going much slower. I notice this one car, weaving in and out of traffic in these two lanes, trying desperately to get ahead, constantly cutting people off. They did this for 40 miles, weaving in and out, sometimes getting…
Unless you only noticed that one car that was terrible at getting ahead. Better drivers might have passed you only once and you didn't notice them because you never saw them again.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#8I don't have problem people investing their personal money in hedge funds, but as indicated by the article, large institutions also invest in hedge funds, which in many cases are just a collection of smaller hedge fund, each charging hefty fee.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#9Reminds me a little of traffic. Yesterday I was cruising down the highway in the leftmost lane, going about 80 with a line of other cars. The other two lanes were actually more clear, but cars were going much slower. I notice this one car, weaving in and out of traffic in these two lanes, trying desperately to get ahead, constantly cutting people off. They did this for 40 miles, weaving in and out, sometimes getting…
This is a poor analogy, and will only serve to induce responses to the analogy rather than the topic at hand.
Re: Buffett wins $1M decade-old bet that the S&P500 would outperform hedgefunds
#10Reminds me a little of traffic. Yesterday I was cruising down the highway in the leftmost lane, going about 80 with a line of other cars. The other two lanes were actually more clear, but cars were going much slower. I notice this one car, weaving in and out of traffic in these two lanes, trying desperately to get ahead, constantly cutting people off. They did this for 40 miles, weaving in and out, sometimes getting…
The analogy works even deeper -- I've seen articles talking about how large amounts of lane changing actually slows traffic overall.