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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)

#101

Post by Galanwe »

hamilyon2 wrote: post #94
Galanwe wrote: post #56

Earlier quoted context omitted.

> 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.

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

Of course it is, though not exactly by "borrowing money" in a "mortgage" sense. Margin trading is a way to take leverage, derivatives is another. The former is simpler but costly, the latter is cheaper and allows you much more than 10x leverage, though it requires some high school mathematical thinking.

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

#102

Post by Galanwe »

alright2565 wrote: post #99
Galanwe wrote: post #56

Earlier quoted context omitted.

> 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.

5x leverage is nothing, most retail brokers will offer you much better future initial margins.

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

#103

Post by OJFord »

wcoenen wrote: post #48
throwaway2037 wrote: post #15

Earlier quoted context omitted.

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…

Picking the S&P500 over a world index because you think it will outperform, has the same problem as picking individual stocks over an index. You can't actually know which will outperform in the future.

Or, where in the world do you need to spend your money?

I live in the UK: if I buy the S&P500 over the FTSE100 (or even more so the 250, the next 250 largest companies which are typically more UK-market-oriented) I'm making a US-weighted bet. But maybe I think I'll move there, and should have that exposure. Or maybe I spend a lot of money all over the world and want a more global exposure overall.

I think at least vast majority index is right for basically everybody, but you do still need to think about which index/indices are most applicable to your situation/intentions.

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

#104

Post by emacdona »

To any fund manager out there that truly believes you can beat the market, here is how you can sell me your fund:

We agree on an index and a time frame. You guarantee me the same return as the index within that time frame. If you beat the index, you keep 90% of returns ABOVE the index (and I get 10%). We both win, and you win big.

If you don't beat the index (within the time frame), you make up the difference (so I get the return to the index).

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

#105

Post by mewpmewp2 »

anamax wrote: post #28
selestify wrote: post #23

Earlier quoted context omitted.

How does that explain Warren Buffet’s spectacular success?

Someone with Buffet's success should exist by random chance. (Flip a fair coin enough times and it will come up heads 20 times in a row.) Also, some fraction of Buffet's success comes from deals that the rest of us don't have access to.

Yeah, I have tried to simulate this several times under different conditions. Given zero sum game and random odds, there is always going to be small percentage who have a lot and most will have below what they started with. It is easy to explain as well, if you for example start with $1000 and you have 50% odds of winning 10% every time. If you win and lose 50% you are going to be below what you started.

If you always win after lose and lose after win, then it would go like this:

1. $1000

2. $1100

3. $990

4. $1089

And so on... After 100 turns you would have only around 600 - 700.

But it's a zero sum right. Where does the 300 - 400 go? It goes exponentially to select few who by random chance have more wins than losses.

In fact the longer it goes on, the higher odds of there being outlier with a lot - you might expect that everyone would converge around $1000, but that is not the case.

I did an example run with 10 000 investors, each doing 1000 trades, each trade they bet 10% of their portfolio, with 50% odds of winning.

First investor had 562 wins and 438 losses, with $1,666,061.

Median investor had only $7 left with 500 wins and 500 losses.

Top 10th percentile investor had $364 with 520 wins and 480 losses.

So interestingly even an investor that had 40 wins more than losses, lost 2/3 of portfolio.

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

#106

Post by OJFord »

asdasdsddd wrote: post #12
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 catch 22 for active management is that if they are actually good then they would just use their strategies to manage their own money.

They do. But if you offer the service to other people, you get a lot more money to play with (meaning you can do more or different things than you could with less) and get to charge performance fees etc. in addition to your own capital gains.

Really, you could say it about absolutely any job, it's just a bit more direct with managing money. 'If you were any good at writing software you would just sell your own SaaS', etc.

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

#107

Post by mikeyouse »

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.

From some of their legal settlements it seems a not insignificant part of their advantage is dreaming up obscure illegal tax dodges on short term capital gains that are later revealed as such to keep more funds invested.

https://www.moomoo.com/news/post/5891516/the-biggest-tax-eva...

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

#108

Post by jppittma »

emacdona wrote: post #104

To any fund manager out there that truly believes you can beat the market, here is how you can sell me your fund: We agree on an index and a time frame. You guarantee me the same return as the index within that time frame. If you beat the index, you keep 90% of returns ABOVE the index (and I get 10%). We both win, and you win big. If you don't beat the index (within the time frame), you make up the difference (so I g…

I feel like some creative use of beta could make this a very lucrative deal for a patient, but unscrupulous fund manager.

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

#109

Post by dralley »

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've done well (39% annual returns) investing in 2-3 individual stocks in addition to index funds for the rest of my investments. More than that would be IMO too much to pay attention to.

Admittedly my choices for stocks are a bit on the high-risk side, but it's worked out well so far. Picking up lots of AMD in 2017, and Rivian 6 weeks ago, seems to have been decent calls.

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

#110

Post by Findeton »

emacdona wrote: post #104

To any fund manager out there that truly believes you can beat the market, here is how you can sell me your fund: We agree on an index and a time frame. You guarantee me the same return as the index within that time frame. If you beat the index, you keep 90% of returns ABOVE the index (and I get 10%). We both win, and you win big. If you don't beat the index (within the time frame), you make up the difference (so I g…

Fundsmith for example has beaten the market for a long time (not this year though). I can also mention another Spanish fund that I know: Tercio Capital.

https://markets.ft.com/data/funds/tearsheet/charts?s=GB00B4Q... https://www.finect.com/fondos-inversion/ES0174115057-Cinvest...

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