Nevada’s public employee pension fund invests passively and beats peers (2016) • Hacker News Board

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#11

Post by elil17 » Sun, Jul 14, 2024, 2:57 AM UTC

Short answer re: investing in active managers (based on my many years listening to rationalreminder.ca) is that, if you eliminate some of the worst active managers, the average returns net of fees are the same. However, eliminating the worst managers is challenging (but not impossible) to do ex-ante. Even then, you’re only getting the same average returns as indexing, not better. Plus, you will experience a higher dispersion with active managers (greater chance of extreme negative or positive outcome), which is not desirable. Because of these two issues, It’s definitely better to pick an index fund.

Re: picking stocks yourself, the answer is also pretty cut and dry. There’s strong evidence no individual trader can expect to beat the market. Active managers can only beat the market gross of fees because they employ large teams of people to do a lot of work to gain a small edge (stuff like predicting retail sales numbers from satellite images of store parking lots).

This is my attempt at summarizing a whole field of research in a few sentences. There are many more nuisances. I highly recommend listening to the Rational Reminder podcast if you’re curious about this sort of thing. They interview a lot of academics.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#12

Post by asdasdsddd » Sun, Jul 14, 2024, 3:05 AM UTC

The catch 22 for active management is that if they are actually good then they would just use their strategies to manage their own money.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#13

Post by chii » Sun, Jul 14, 2024, 3:07 AM UTC

> a higher dispersion with active managers (greater chance of extreme negative or positive outcome), which is not desirable.

some people prefer the chance to win the lottery rather than get a steady income stream.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#14

Post by BurningFrog » Sun, Jul 14, 2024, 3:08 AM UTC

That's pretty much how I did it.

I didn't actually forget, of course, but I didn't get around to looking at the numbers every year. And when I did, I hardly ever changed anything.

Of course, buying Apple in 1997 was also an important factor.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#15

Post by throwaway2037 » Sun, Jul 14, 2024, 3:10 AM UTC

But why stress about beating the market? Just be the market with an ETF that tracks the S&P 500 index. Literally, setup auto invest from your paycheck. Go to sleep (Rip van Winkel style). Wake up 40 years later and retire comfortably.

Look at total returns over the last 40 years on the most popular indices in the world. S&P 500 crushes them all. I see a lot of "Internet advice" recommending various MSCI world indices. They are all much worse than the S&P 500.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#16

Post by throwaway2037 » Sun, Jul 14, 2024, 3:15 AM UTC

Except this is a myth. You will not win the lottery without taking crazy amounts of risk. The active managers who do beat a major index for a long, long time almost do not exist in retail space, and they beat the market by a tiny amount (~1%). In my era Legg Mason was the most famous, but even they fell too.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#17

Post by wenc » Sun, Jul 14, 2024, 3:16 AM UTC

The common refrain is that "time in the market always beats timing the market".

The implicit assumption in that refrain is that, despite periodic dips, the U.S. stock market always goes up over time. This has been true since the Great Depression (see graph of S&P 500 since 1929)

https://www.officialdata.org/us/stocks/s-p-500/1929

The implicit assumption behind that is that the American economy always invents a way to grow. Buffet famously said, "never bet against America".

For as long as these assumptions match reality, it's likely that passive management will continue to succeed.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#18

Post by geodel » Sun, Jul 14, 2024, 3:16 AM UTC

Funny. Just today I receive main from Fidelity to review my account. The only thing I wish to but can't afford to change is retirement age to an earlier date.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#19

Post by acchow » Sun, Jul 14, 2024, 3:36 AM UTC

The general wisdom is that it’s basically impossible for most people to tell the good fund managers from the bad/mediocre ones.

Except Warren buffet. A lot of people went with Berkshire Hathaway and did very well.

Re: Nevada’s public employee pension fund invests passively and beats peers (2016)

#20

Post by danielmarkbruce » Sun, Jul 14, 2024, 3:40 AM UTC

It's sort of self evident - if you are freakishly capable of spotting mispriced securities in a market full of smart hard working people who are paying attention, you can do better than average. If you aren't freakishly capable... you cant.

It's sort of like "does playing pro golf make sense?".