111–120 of 286 posts
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You can always just let someone else do the research and buy shares of Berkshire Hathaway
Berkshire Hathaway has under-performed the S&P 500 for >10 years now. And one of the main reasons why they're doing so well at all is probably because they have a sizeable holding of AAPL.
Buying value stocks may be better than buying an index, but identifying value stocks is hard and time consuming. Wouldn't the average investor be better off buying index funds, since the average investor does not have the time, inclination, or training to find value stocks?
You can always just let someone else do the research and buy shares of Berkshire Hathaway
Michael Burry has two main points against index funds: 1) large-scale passive investing has deteriorated the price discovery mechanism for index funds and 2) there's a liquidity risk because trillions of dollars are linked to stocks in index funds that only have hundreds of millions of trade volume. So if there's a cascading failure, as smarter money realizes the price is wrong and begins to exit, there will be no bu…
Does he have advice for what passive investors should do instead?
If you assume that a bad bear market is a 40% drawdown, and since 2009 the S&P 500 has gained 20% on a good year, you only need just 2 good years or a mixture of some good and mediocre years to offset a bear market. So this means staying out of the market even for just 2-4 years may mean never having the chance to buy back at a lower price even in a bear market. Indeed, the market crashed in early 2020 due to Covid b…
History has no value in predicting future returns. You just randomly picked a period to make your point. Many such instances disprove it where the breakeven return is more on the magnitudes of decades. We're approaching a seismic shift in monetary policy, from expansion to compression in a high inflation world—something many investors haven't yet experienced.
The DJIA has posted real returns since its inception 100 years ago . I like those odds of it continuing to do so. Japan and the Great Depression are outliers. US equities tend to do better than foreign ones. Time sitting out of the market awaiting the crash that never comes means missed returns you will never see, means losing $ to inflation too.
There's something really insidious about tying 401ks and other retirement accounts to the stock market. People including myself end up with a large portion of our assets essentially gambled on the future success of US corporations. It gives some false legitimacy to this idea that our media is constantly pushing, that if the stock market is going well then regular Americans are doing well.
> There's something really insidious about tying 401ks and other retirement accounts to the stock market. Insidious? That’s a bit rich. You can allocate money in your 401k however you want. It’s self-directed. If you don’t like stocks keep it in bonds or cash.
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This is 1000000% true. The entire system is completely broken. It is literally designed to make the markets keep going up, which as usual benefits the wealthy far more than the average person. And people who are even middle class barely really benefit from it. While the lower class and poor don't benefit at all. I choose not to participate in "investing" because it's not investing. It's literally gambling. You can't…
You mean “guaranteed social security” by a government that keeps borrowing more money and spending social security funds just as they do regular tax income? You have a lot more faith in our government than I do. If you choose not to invest, do you keep all of your money in a savings account that loses value to inflation?
In my country, Argentina, the state manages the retirement funds of the people. And they have been destroying their savings for decades.
People who worked for 45 years get into retirement to learn that all their savings got destroyed by the inflation. There used to be, alternatively, private systems, but they were nationalized so the state took the retirement funds of all the people who trusted in the privates more than in the state, and now they are giving them pennies. So all that people feels that they were right by not giving their money to the state in first place.
Your retirement system might be flawed, but at least you have the freedom to decide what to do with your own money. And, thanks to that, American people is way more savvy about finances and investment, and how money works. In my country, the average person knows nothing about basic economy, or even about how to save money. Otherwise, no government would be able to keep a 30% base of the votes despite getting us a 50% of inflation year after year.
The author uses Buffets essay to justify value investing over index funds, but Buffet is a strong proponent of index funds for non professional investors. Instead of stock picking, Buffett suggested investing in a low-cost index fund. “I recommend the S&P 500 index fund,” Buffett said, which holds 500 of the largest companies in the U.S., “and have for a long, long time to people.” He’s even putting 90% of his own es…
Those using Buffet's name should also look at the time and effort Buffet puts in to pick stocks. He sifts through reams of reports, cash flow statements and what not. And to top it up you need deep pockets and emotional wherewithal to not blink when your value investment bets are not doing well.
"Value investment" sounds cool but is not for a typical retail investor. As you rightly pointed out retail investors are best served picking up an index fund or 2-3 mutual funds if they are seeking to diversify.
why not simple sell a market when goes up and buy it othewise?
I took a fun little class once on algorithmically playing the stock market. The take away lesson was that the main public stock markets have so many players, many of which are algorithmically driven, that there's nothing left for easy picking. It's basically noise. Best advice? Go play the algorithm game in smaller markets that don't have as many sophisticated players in them. E.g. some smaller betting markets, things like that. And only with play money, but your retirement money in an index fund ;-).