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

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

#61

Post by g15jv2dp »

Galanwe wrote: post #58
lotsofpulp wrote: post #55

Earlier quoted context omitted.

> - Don't compare investments based on annualized returns alone, it really doesn't make any sense. >- Don't compare investments one against an other, instead look at the addivity of one on top of another. I don’t think either of these matter to 90% of investors whose goal is to build up a nest egg for retirement which means not spending for decades in the future. Sharpe ratios and all those “risk” adjusted calculatio…

> Sharpe ratios and all those “risk” adjusted calculations all involve assumptions that may or may not be true. On the contrary, these risk adjusted measures assume nothing more than a normally distributed random variable. If you just look at annualized returns, then go ahead and invest in CDOs ETFs. More seriously, the S&P for instance has around 20% annualized vol, which IMHO is way above what you would want for a…

> On the contrary, these risk adjusted measures assume nothing more than a normally distributed random variable.

The financial sector isn't yet so unrelated to reality that the price of securities is random.

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

#62

Post by heresie-dabord »

BurningFrog wrote: post #14
djkivi wrote: post #9

Fidelity: Successful investors forget they have an account: https://www.bogleheads.org/forum/viewtopic.php?t=146347

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.

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

Had the fare, boarded the right train at the right time.

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

#63

Post by qwytw »

elil17 wrote: post #11
decasia wrote: post #4

I'm curious if this is demonstrably an optimal strategy for individual investment too... I haven't had much success getting any clear data about whether active management demonstrably produces better results.

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 di…

> picking stocks yourself, the answer is also pretty cut and dry. There’s strong evidence no individual trader can expect to beat the market.

Is there? It would make sense if an average individual trader can't expect to beat the market. Claiming that there are no individual investors who did/can do that over a reasonably long period is both objectively false and rather absurd.

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

#64

Post by qwytw »

cowthulhu wrote: post #46
personjerry wrote: post #44

Earlier quoted context omitted.

> There’s strong evidence no individual trader can expect to beat the market. I don't understand that. If you just bought Apple instead of SPY 20 years ago wouldn't you be doing great?

The key is that for every Apple, there are a ton of companies we don’t even remember the names of that went out of business or otherwise did not beat the SP500. Put another way - if you can reliably pick the next Apple before anyone else, you should go work in finance and make tons of money.

> Put another way - if you can reliably pick the next Apple before anyone else

Problem is that it might take years to verify that.

> The key is that

That doesn't change the fact that there are plenty (in absolute numbers) of individual investors who consistently beat the market. Whether that's because of luck or something else is rather hard to tell.

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

#65

Post by qwytw »

desmosxxx wrote: post #45
personjerry wrote: post #44

Earlier quoted context omitted.

> There’s strong evidence no individual trader can expect to beat the market. I don't understand that. If you just bought Apple instead of SPY 20 years ago wouldn't you be doing great?

You do know there are thousands of stocks right. how many people dump their entire savings into one stock. 20 years ago you wouldn't have known apple was going on to do so well. If people did know it would have been bid up in price at the time

Which still means that SOME individual investors will inevitably beat the market.

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

#66

Post by hibikir »

qwytw wrote: post #63
elil17 wrote: post #11

Earlier quoted context omitted.

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 di…

> picking stocks yourself, the answer is also pretty cut and dry. There’s strong evidence no individual trader can expect to beat the market. Is there? It would make sense if an average individual trader can't expect to beat the market. Claiming that there are no individual investors who did/can do that over a reasonably long period is both objectively false and rather absurd.

Read the GP carefully.Expect to beat is very different than beat. You don't expect to beat the casino in roulette, but some people will luck out. That doesn't mean they could expect to win in advance: They should expect a small loss, depending on the table, and be surprised when luck smiles upon them.

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

#67

Post by qwytw »

satvikpendem wrote: post #52
personjerry wrote: post #44

Earlier quoted context omitted.

> There’s strong evidence no individual trader can expect to beat the market. I don't understand that. If you just bought Apple instead of SPY 20 years ago wouldn't you be doing great?

It is on average, not from cherry picked examples.

That claim is not phrased like that, so why would we interpret that way?

> average

So what? It's like saying that since an average person can't run a marathon it wouldn't make sense for any individual to even try it. How does that make sense?

> cherry picked

If we agree that 50% of all investors can't beat the market, what proportion can? 1%, 10%, 30%? Because there is a massive difference.

How do we even define that group? Is it any random person buying random stocks with pocket change? Is it above a certain portfolio size? etc.

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

#68

Post by lotsofpulp »

Galanwe wrote: post #58
lotsofpulp wrote: post #55

Earlier quoted context omitted.

> - Don't compare investments based on annualized returns alone, it really doesn't make any sense. >- Don't compare investments one against an other, instead look at the addivity of one on top of another. I don’t think either of these matter to 90% of investors whose goal is to build up a nest egg for retirement which means not spending for decades in the future. Sharpe ratios and all those “risk” adjusted calculatio…

> Sharpe ratios and all those “risk” adjusted calculations all involve assumptions that may or may not be true. On the contrary, these risk adjusted measures assume nothing more than a normally distributed random variable. If you just look at annualized returns, then go ahead and invest in CDOs ETFs. More seriously, the S&P for instance has around 20% annualized vol, which IMHO is way above what you would want for a…

>On the contrary, these risk adjusted measures assume nothing more than a normally distributed random variable.

That is exactly what I am referring to. For example, from Wikipedia:

https://en.wikipedia.org/wiki/Sharpe_ratio

>However, financial assets are often not normally distributed, so that standard deviation does not capture all aspects of risk. Ponzi schemes, for example, will have a high empirical Sharpe ratio until they fail. Similarly, a fund that sells low-strike put options will have a high empirical Sharpe ratio until one of those puts is exercised, creating a large loss. In both cases, the empirical standard deviation before failure gives no real indication of the size of the risk being run.

>Do you have any sort of reasoning or is it just a gut feeling?

The reasoning is that their volatility is negligible over the long term due to political forces. Of course, it is also an assumption that could be wrong, but the mechanisms for government policy (democracy, aging demographics, and voter participation trends) seem to favor reducing purchasing power of currency rather than letting broad market equity prices stall or slide down.

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

#69

Post by throw0101d »

djkivi wrote: post #9

Fidelity: Successful investors forget they have an account: https://www.bogleheads.org/forum/viewtopic.php?t=146347

Your link has John O'Shaughnessy being interviewed by Barry Ritholtz (two respected folks in finance), and O'Shaughnessy later corrected himself:

* https://twitter.com/jposhaughnessy/status/115517108366392524...

While I do believe set-and-forget passive investing is best for the vast majority of people, last time I checked that Fidelity study does not actually exist, and the story is apocryphal (no one seems to be able to actually link to it).

If you ask Fidelity about it, they'll tell you it does not exist:

* https://www.morningstar.com/columns/rekenthaler-report/archi...

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

#70

Post by taraparo »

decasia wrote: post #4

I'm curious if this is demonstrably an optimal strategy for individual investment too... I haven't had much success getting any clear data about whether active management demonstrably produces better results.

It is the opposite. Market timing does not work reliably. Active management produces worse results on the long run. no individual trader or active manager can consistently beat the market. however active fonds may have periods (even several years) where they out perform.

for private investors buy-and-hold of highly distributed ETFs is the best way to do it. The easiest way to get started is a one ETF portfolio like e. g. Vanguard FTSE All World or SPDR MSCI ACWI IMI. They perform internal rebalancing automatically and you virtually have nothing to do. buy them and don't look at them for the next 20 years.

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