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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)

#121

Post by ryandrake »

qwytw wrote: post #82
hibikir wrote: post #66

Earlier quoted context omitted.

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.

> You don't expect to beat the casino in roulette, Do you believe that investment is entirely random and there is absolutely no skill involved? Because if not, that's a nonsensical analogy. You should use a a both both luck and skill based game like poker (probably not the casino variety, though) etc. Otherwise if you can reasonably expect to beat 50% of all "players" (of course it takes much more time to verify that…

> Do you believe that investment is entirely random and there is absolutely no skill involved?

The skill involved is more just "best practices" that let you match the market: Buy-and-hold, diversify, basically, do what the index funds do and you will be roughly +0 to the market. Beyond that, it's a totally random distribution that adds between -X and +X which allows some participants to beat the market and causes some to underperform. You can't tell beforehand which participants will beat the market, even having full knowledge of their strategies and skill. If you think you can, please tell me which active funds will beat the market in the next 10 years based on their skills. I'll invest in them.

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

#122

Post by throw0101d »

selestify wrote: post #23
throwaway2037 wrote: post #16

Earlier quoted context omitted.

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.

How does that explain Warren Buffet’s spectacular success?

> How does that explain Warren Buffet’s spectacular success?

1. Buffett has been underperforming the S&P 500 for about twenty years now:

* https://www.linkedin.com/pulse/warren-buffett-has-underperfo...

* https://news.ycombinator.com/item?id=37827101

For most people who are saving for retirement between the ages of (say) 30 to 65, that's most of their investing lifetime, and such underperform could radically effect the life they can live once they start working. Do you want risk your proverbial Golden Years simply because you chose not to take the market average returns?

2. While Buffett is a better-than-average investor (and certainly better than me), the main reason why we know him is because he's so rich, but as Morgan Housel notes, the vast majority of that wealth has come from compounding:

> As I write this Warren Buffett’s net worth is $84.5 billion. Of that, $84.2 billion was accumulated after his 50th birthday. $81.5 billion came after he qualified for Social Security, in his mid-60s. Warren Buffett is a phenomenal investor. But you miss a key point if you attach all of his success to investing acumen. The real key to his success is that he’s been a phenomenal investor for three quarters of a century. Had he started investing in his 30s and retired in his 60s, few people would have ever heard of him. Consider a little thought experiment. Buffett began serious investing when he was 10 years old. By the time he was 30 he had a net worth of $1 million, or $9.3 million adjusted for inflation.[16] What if he was a more normal person, spending his teens and 20s exploring the world and finding his passion, and by age 30 his net worth was, say, $25,000? And let’s say he still went on to earn the extraordinary annual investment returns he’s been able to generate (22% annually), but quit investing and retired at age 60 to play golf and spend time with his grandkids. What would a rough estimate of his net worth be today? Not $84.5 billion. $11.9 million. 99.9% less than his actual net worth. Effectively all of Warren Buffett’s financial success can be tied to the financial base he built in his pubescent years and the longevity he maintained in his geriatric years. His skill is investing, but his secret is time. That’s how compounding works. Think of this another way. Buffett is the richest investor of all time. But he’s not actually the greatest—at least not when measured by average annual returns.

* https://www.goodreads.com/quotes/10551666-more-than-2-000-bo...

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

#123

Post by bandyaboot »

cjblomqvist wrote: post #119
bandyaboot wrote: post #113

Earlier quoted context omitted.

You’re probably aware that no fund manager would accept your offer. But it doesn’t prove that they don’t think they can beat the market (as misguided as that belief might be), it just means they’re not willing to take on an absurd amount of risk to prove it.

Exactly. No point being the one taking the risk - if the professionals don't dare take the risk then any non-professional (fund buyer) shouldn't either (under normal circumstances). PS. Furthermore, an accurate comparison is not beating the index, it's beating it enough to cover the salary/compensation of the fund manager + some (with less risk! Risk = cost!)

Well I think many fund managers regularly take on risk to achieve higher returns. They just won’t take on 100% downside risk while being taxed 10% on the upside.

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

#124

Post by cjblomqvist »

Findeton wrote: post #110
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...

There are some research (instead of cherry picking/anecdotes). I don't have any links right now but basically half of the funds lose compared to the index (by law of nature - averages and all that). Furthermore, taking fees into account, just a few percentages make anything more (over time) - which is probably within scope of randomness.

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

#125

Post by [deleted] »

JumpCrisscross wrote: post #54
selestify wrote: post #23

Earlier quoted context omitted.

How does that explain Warren Buffet’s spectacular success?

> How does that explain Warren Buffet’s spectacular success? Buffett buys “cheap, safe, high-quality stocks” with leveraged “financed partly using insurance float with a low financing rate” [1]. TL; DR He’s doing private equity with discipline. [1] https://www.aqr.com/Insights/Research/Journal-Article/Buffet...

[deleted]

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

#126

Post by emacdona »

bandyaboot wrote: post #123
cjblomqvist wrote: post #119

Earlier quoted context omitted.

Exactly. No point being the one taking the risk - if the professionals don't dare take the risk then any non-professional (fund buyer) shouldn't either (under normal circumstances). PS. Furthermore, an accurate comparison is not beating the index, it's beating it enough to cover the salary/compensation of the fund manager + some (with less risk! Risk = cost!)

Well I think many fund managers regularly take on risk to achieve higher returns. They just won’t take on 100% downside risk while being taxed 10% on the upside.

I think this gets at a deeper point I'm trying to make.

If you truly can consistently beat the market, you are already making a killing with your _own_ money.

If you want to use _my_ money to place your bets (presumably b/c you want to leverage your market beating ability), I want a guarantee (because I'm more than happy to take the return of the index).

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

#127

Post by throw0101d »

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…

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

Or you invest in a total world market fund for better diversification.

Diversification would have helped anyone in Japan(-only) in 1990, and anyone in the US(-only) in the 2000s. It's a very easy strategy nowadays:

* https://investor.vanguard.com/investment-products/etfs/profi...

* https://www.vanguardinvestor.co.uk/investments/vanguard-ftse...

* https://www.vanguard.ca/en/advisor/products/products-group/e...

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

#128

Post by throw0101d »

acchow wrote: post #19
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 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.

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

Buffett has been underperforming the S&P 500 for about twenty years now:

* https://www.linkedin.com/pulse/warren-buffett-has-underperfo...

* https://news.ycombinator.com/item?id=37827101

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

#129

Post by paxys »

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…

Where will they find the money to pay you if they lose?

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

#130

Post by Beijinger »

All this is true, and there are many good comments in the thread here. But this "hey dude, stock picking is for idiots and all non idiots but index funds" should be treated with caution. Index funds are an extremely clever idea but were never meant to be used on such a scale.

To give you some ideas:

https://www.forbes.com/sites/chriscarosa/2024/04/02/index-fu...

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