81–90 of 323 posts
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It's not just some people. It is actually the law in most states (albeit a seldom-enforced one). Don't cruise in the left lane.
Most people cruise at a speed that is faster than everyone else in the other (non-left) lanes. But, please don't be the car that is cruising at 60mph in the left lane. It is a leading cause of accidents.
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> You have to consider risk. The question is: OK, you account for risk, now what? You can manage risk by tempering an all-stock portfolio with bonds, lowering volatility. Why pick high-cost hedge funds over that option? > Throw them all together in a pot and all the spice is gone. Except if you look at the breakdown, any one of those sub-funds did poorly. None beat the S&P. > Plenty of individual funds did beat the S…
What about the fact that certain strategies can only be invested in but for hedge funds?
Any leveraged bond fund should have been able to as well, a carry trade from 2012 in European government bonds should have made many hundreds of percent
A futures fund should have been able to
A commodity options should have made monumental gains over the 85% that the S&P500 gave in 10 years, honestly should have made that in a month
A fund that did what Warren Buffet got rich doing, by buying up bad companies and improving, should still have gotten high returns
And finally, there were simply no cryptocurrency funds around!
The problem, I say smugly, is that these fund of funds were probably all macro funds with too many assets under management, making them hard to manage in the niche markets I proclaimed.
A fund with 1 billion AUM cannot manage that much real estate without eating into the management fees. There is not enough liquidity in the options market, and definitely not enough liquidity in cryptocurrencies.
But this unfortunately influences perception that "NOBODY" is able to make / promise more than 5% a year over several years. This is false but I'm not going to try to change your mind. Consolidating capital with someone managing <500k to around 25 million should be able to consistently take advantage of these less scalable opportunities for great profits. After all, it is how Warren Buffett himself got 100s of thousands of percentage gains in his hedge fund of $105,000.
Hedge fund guy here. - You have to consider risk. Perhaps use volatility as a proxy. Were the funds more or less volatile than the S&P? There are funds that are more and funds that are less. The bet ought to be adjusted for that, ie some form of risk adjusted return. - It's a rigged bet. A fund of 5 funds of funds is going to be the market, minus fees. Yes there are funds that aren't just long the market but quite a…
> You have to consider risk. The question is: OK, you account for risk, now what? You can manage risk by tempering an all-stock portfolio with bonds, lowering volatility. Why pick high-cost hedge funds over that option? > Throw them all together in a pot and all the spice is gone. Except if you look at the breakdown, any one of those sub-funds did poorly. None beat the S&P. > Plenty of individual funds did beat the S…
I think his point is that hedge funds may have higher risk-adjusted returns than the S&P 500, despite lower absolute returns. For (ridiculously unrealistic) example, say you have an average 7%/yr return on the S&P 500 with volatility of ~14% and a hedge fund with a 5%/yr return but volatility of ~1%. At the end of the time period, a fixed $1M investment is clearly going to come ahead on the S&P 500 but the hedge fund is clearly the better fund, as matched for volatility (through leverage) with the S&P 500, the returns would be 70%/yr.
You'd pick the hedge fund because matched for volatility (through leverage or bonds or what have you), the hedge fund performs better.
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A weak attempt at damage control. He keeps reiterating his parole that experts who actively select assets know more then the average Joe. Even though the average Joe just completely blew them out of the water over a whole decade :)
I agree that said experts probably don't know enough to justify their cost. But if the conclusion one draws is that the US large cap stock market is the place to put your money for the next 100 years just because it was great the last 100 years, I think that's the wrong lesson. Of all the markets in all the countries in the world, and all the asset classes, the US stock market has been an outlier for a long time, and…
Or one could be even more cynical, and observe that China appears to be pouring "hard" power behind decades of "soft" power build-up...
So clearly, for the individual, the optimal strategy is to simply invest in index funds and just wait. But a new question that is being raised is: "what happens if everyone only invests in index funds?"
this whole study is based on the equities market, and there are many many capital markets out there with much higher returns.
the individual? right, none of these markets are so optimal for retirement, they are optimal for great returns though
this study wasn't about the individual, it was about funds of funds that were picked pretty unoptimally and most likely were also in the equities market.
what is the individual to do? hey maybe your conclusion was right, but I don't find 85% over ten years to be great, even factoring in dollar cost averaging and dividend reinvesting. so there is the possibility for the individual to learn and take risk or find a fund that is more suited to the market you would like to get returns in.
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> You have to consider risk. The question is: OK, you account for risk, now what? You can manage risk by tempering an all-stock portfolio with bonds, lowering volatility. Why pick high-cost hedge funds over that option? > Throw them all together in a pot and all the spice is gone. Except if you look at the breakdown, any one of those sub-funds did poorly. None beat the S&P. > Plenty of individual funds did beat the S…
> The question is: OK, you account for risk, now what? You can manage risk by tempering an all-stock portfolio with bonds, lowering volatility. Why pick high-cost hedge funds over that option? I think his point is that hedge funds may have higher risk-adjusted returns than the S&P 500, despite lower absolute returns. For (ridiculously unrealistic) example, say you have an average 7%/yr return on the S&P 500 with vola…
Meanwhile, though, a generic vanilla Total Bond market index fund over the past 10 years returned 4.3% annually. A $100,000 investment would have turned into over $150,000 over the course of the bet, higher than the hedge fund collection. So the hedge funds would have to have less volatility than a very steady intermediate-duration bond fund, which, incidentally, had far lower draw-downs in its worst years. So at the very least, in plain language, if 'big drops' are a measure of risk, then the hedge fund set was riskier than bonds and still lost to bonds.
Okay so any leveraged real estate fund would have outperformed the S&P500, without the possibility of a sudden margin call Any leveraged bond fund should have been able to as well, a carry trade from 2012 in European government bonds should have made many hundreds of percent A futures fund should have been able to A commodity options should have made monumental gains over the 85% that the S&P500 gave in 10 years, hon…
This is not what people think. What people think is that you have cherry picked a bunch of asset classes above and neglected others that would beat the US Large Cap index over that time frame, but you cannot guarantee that those same asset classes would handily beat the same index over the next decade.
If you can (Medallion fund type legends), then you aren't seeking my money, typically.