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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)

#91

Post by benrapscallion »

ChrisMarshallNY wrote: post #87
thevillagechief wrote: post #79

It was Richard Thaler's Misbehaving: The Making of Behavioral Economics book that finally broke through my thick, anxiety ridden skull and convinced me to stop reading economic news everyday and just forget the the retirement accounts existed. If I'd read that book earlier, I'd be up 3X on my positions.

I haven't touched my 401(K) in over 30 years. It's done 9-20% per year. It's not super aggressive, but will take a hit, on really bad markets (the only year it actually lost money, was 2020 -and it has completely made up for that. It even made some money in 2008). I ignore the Fidelity calls. Every time a new broker rotates in, they try to get me to move my money around.

Is it invested in an index fund?

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

#92

Post by pfortuny »

TrainedMonkey wrote: post #80
taraparo wrote: post #70

Earlier quoted context omitted.

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…

Noting that it is possible to beat market, with strategies / algorithms that are generally non-public. For example medallion fund, see https://posts.voronoiapp.com/markets/Jim-Simons-Medallion-Fu... . Note that these crazy performance stats are after the steep fixed + performance fees.

Yep. Statistically, there must be some outlier. Always. And… good luck having the data they use to trade and the money to just enter into the markets they participate in.

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

#93

Post by amanaplanacanal »

Galanwe wrote: post #56
Karellen wrote: post #53

Earlier quoted context omitted.

> getting 10% average annual returns with 10% annual volatility is worst than getting 5% returns with 1% annual volatility. Doesn't this depend on how long you're planning on investing for, and what your criteria for selling your investments are? If you're planning on investing for at least 10 years, and you're willing to give yourself a 2-3 year window for selling your investments once they reach a threshhold you de…

> isn't the 10%/10% investment better? If you consider that "you don't know any better" and returns are normally distributed (i.e. you don't have some secret sauce nobody else knows about), then there is no dimension in which the 10/10 is better. You can convince yourself intuitively by imagining how you would maximize each strategy. The amount of money you have is a factor of the risk you take, because if you want t…

Until a black swan event bankrupts you because of the leverage you have taken on.

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

#94

Post by hamilyon2 »

Galanwe wrote: post #56
Karellen wrote: post #53

Earlier quoted context omitted.

> getting 10% average annual returns with 10% annual volatility is worst than getting 5% returns with 1% annual volatility. Doesn't this depend on how long you're planning on investing for, and what your criteria for selling your investments are? If you're planning on investing for at least 10 years, and you're willing to give yourself a 2-3 year window for selling your investments once they reach a threshhold you de…

> isn't the 10%/10% investment better? If you consider that "you don't know any better" and returns are normally distributed (i.e. you don't have some secret sauce nobody else knows about), then there is no dimension in which the 10/10 is better. You can convince yourself intuitively by imagining how you would maximize each strategy. The amount of money you have is a factor of the risk you take, because if you want t…

Is 10x borrowing even an option if we are talking retirement savings?

I don't know much about finance. I guess that at that point (you borrowed 10 times your net worth). This is no longer your investment, it's your lender's investment. They will adjust interest rate to match the riskiness of whatever you are doing, leaving you with net zero.

Borrowing money is not free.

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

#95

Post by jackcosgrove »

wenc wrote: post #17
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.

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…

> American economy always invents a way to grow

There are various macroeconomic models which attempt to explain the factors of growth, for example the Solow growth model. In this model technological advancement is only one of three factors. The others are the savings rate and the population growth rate.

According to this model, you may not be able to innovate your way to growth if one or both of the other factors are contrary to growth. This may sound academic but there are concrete examples in the last twenty years of countries that have not grown because of a stagnant or shrinking working age population, e.g. Japan and Italy.

This has no bearing on the passive vs active debate, as I'm fairly confident that passive investing will always be the better strategy for a retail investor regardless of the growth potential of an economy.

It's just in a country with unfavorable macroeconomic conditions, passive investing may be the way to minimize losses rather than maximize gains.

The assumption of continued growth will probably hold true for the American economy through the end of the century at least, so for everyone here investing in US equities it is academic. But we can try to decompose an economy into factors and use those to check whether we expect growth to occur at all.

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

#96

Post by benrapscallion »

amanaplanacanal wrote: post #89
TrainedMonkey wrote: post #80

Earlier quoted context omitted.

Noting that it is possible to beat market, with strategies / algorithms that are generally non-public. For example medallion fund, see https://posts.voronoiapp.com/markets/Jim-Simons-Medallion-Fu... . Note that these crazy performance stats are after the steep fixed + performance fees.

Strangely, the other funds operated by the same company and actually open to outside investors, have not performed as well. It is unexplained exactly why.

Acquired.fm has a great episode on RenTec medallion fund vs their institutional funds.

‘David: The way that some folks we talked to described the difference between the institutional funds and Medallion to us is that Medallion’s average hold time for their trades and positions is (call it) a day, maybe a day-and-a-half. Whereas the average hold time for the institutional funds positions is a couple of months.’

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

#97

Post by Galanwe »

lotsofpulp wrote: post #68
Galanwe wrote: post #58

Earlier quoted context omitted.

> 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…

> >However, financial assets are often not normally distributed, so that standard deviation does not capture all aspects of risk

Volatility not being a full measure of risk obviously does not imply that volatility should be ignored.

The former statement about returns not being normally distributed is a, trivially verifiable, factual mistake. Daily stock returns are normally distributed with a slight positive kurtosis. This remains true on any period over the last 30 years.

I am bot arguing either that the Sharpe is an all encompassing measure, some strategies have a returns distribution that is not well explained by Sharpe. I don't think it matters in this argument though.

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

#98

Post by amanaplanacanal »

qwytw wrote: post #65
desmosxxx wrote: post #45

Earlier quoted context omitted.

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.

Some will, but there is no reliable way to tell which one in advance.

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

#99

Post by alright2565 »

Galanwe wrote: post #56
Karellen wrote: post #53

Earlier quoted context omitted.

> getting 10% average annual returns with 10% annual volatility is worst than getting 5% returns with 1% annual volatility. Doesn't this depend on how long you're planning on investing for, and what your criteria for selling your investments are? If you're planning on investing for at least 10 years, and you're willing to give yourself a 2-3 year window for selling your investments once they reach a threshhold you de…

> isn't the 10%/10% investment better? If you consider that "you don't know any better" and returns are normally distributed (i.e. you don't have some secret sauce nobody else knows about), then there is no dimension in which the 10/10 is better. You can convince yourself intuitively by imagining how you would maximize each strategy. The amount of money you have is a factor of the risk you take, because if you want t…

What you're saying sounds right. But in practice, no one is going to lend me, a nobody, 5x my money. At least outside real estate, that's it's own crazy alternate reality.

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

#100

Post by Galanwe »

g15jv2dp wrote: post #61
Galanwe wrote: post #58

Earlier quoted context omitted.

> 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.

I think when stating your opinion against 40 years of econometrical research, including multiple Nobel prizes in economy, you should feel enticed to explain your opinion a bit more than "no I don't think so"...
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