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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)

#141

Post by cess11 »

paxys wrote: post #129
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?

If they don't they'll enter bankruptcy proceedings and their assets get sold and divided between creditors.

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

#142

Post by ghaff »

zeroonetwothree wrote: post #139
dralley wrote: post #109

Earlier quoted context omitted.

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.

Sorry but I never believe these online claims given with no evidence about ridiculously high returns. It’s not to say you are lying but it’s easy to miscalculate these things.

Yeah, I've done quite well with a few specific (tech) stocks that were reasonable picks (and some modest bets that were simply wrong). (Which I mostly funneled into a charitable trust that pays an annuity.) But I certainly wouldn't put all my money or even most of it on such a bet. Even if I think I have a better insight than John Q. Public into something, there are so many variables.

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

#143

Post by jacobsimon »

Beijinger wrote: post #130

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...

One of my big brain investing ideas is to pick the stocks at the top of the index instead of buying the whole index. If index funds continue to rise in popularity, the stocks that are at the top will benefit most from passive investment volume.

Plus, index funds follow a kind of Pareto principle where the top stocks contribute disproportionately to the total return anyway.

As I’ve gotten older though, one of my realizations is that the tax-free rebalancing of index ETFs is their most valuable property, rather than their actual choice of equities.

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

#144

Post by stouset »

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…

The problem is that any active trading strategies now need to beat the market by the cost of a fund manger, the cost of their research, the cost of regular trades, and the cost of short-term capital gains taxes on those trades.

These add up significantly. Instead of having to beat the market at all, you have to beat it by an extra half of a percent or more every year. And you have to do it year after year after year.

All the evidence shows that actively-managed funds are a weighted (against you) coin flip. Less than half will beat the market in a given year. And the results from any given year are independent of the next.

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

#145

Post by jackcosgrove »

jacobsimon wrote: post #143
Beijinger wrote: post #130

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...

One of my big brain investing ideas is to pick the stocks at the top of the index instead of buying the whole index. If index funds continue to rise in popularity, the stocks that are at the top will benefit most from passive investment volume. Plus, index funds follow a kind of Pareto principle where the top stocks contribute disproportionately to the total return anyway. As I’ve gotten older though, one of my reali…

I had an active manager reach out to me with exactly this strategy.

I didn't look at the fees or rebalancing schedule super closely, because I didn't want to invest with the guy, but IMO his market-beating claims were due to increased concentration during a bull market (risk) which could go sideways fast if he didn't rebalance at opportune times.

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

#146

Post by ghaff »

personjerry wrote: post #44
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…

> 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?

Yeah. And 20 years ago, there was no iPhone and an only somewhat interesting MP3 player compared to other brands. I did OK with Apple but not suggesting it was much other than luck.

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

#147

Post by stouset »

qwytw wrote: post #85
jefftk wrote: post #77

Earlier quoted context omitted.

We expect some individual traders to beat the market (and some to do much worse than the marker); that's variance. But each individual trader should not expect to beat the market, because they don't know if they're one of the lucky ones.

> But each individual trader should not expect to beat the market In aggregate sure. But unless we believe that it's entirely random some individual investors can still certainly expect to beat the market, they just can't verify that in advance.

You’re being pedantic in all the wrong ways.

I offer you a bet. We flip a perfectly fair coin. On every heads you gain 10% on top of your bet. On every tails you lose 10%.

It is fair to say that after 100 flips you may profit. If one million people play this game, someone almost certainly will. But you can expect to lose money on this game. By the end, the average person will have about 60% of their original holdings (0.9^50 * 1.1^50).

In this game it’s possible for winners to exist. It’s not even uncommon! You only have to get at least 53 out of 100 flips as heads. Unfortunately there’s also no function that lets you determine a winner in advance, and the longer you play this game the greater the expected loss.

All of the available evidence shows that publicly-available actively-managed funds are essentially playing this game. As expected, many have incredible winning streaks… right until they don’t.

Yes, Ren Tech’s Medallion Fund exists. But you can’t contribute to it; they don’t want your money. Because that requires scaling market inefficiencies and that in and of itself is an intractable problem. Novel strategies ripe for profit don’t have unlimited capacity. They rapidly exhaust alpha.

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

#148

Post by gbear605 »

qwytw wrote: post #85
jefftk wrote: post #77

Earlier quoted context omitted.

We expect some individual traders to beat the market (and some to do much worse than the marker); that's variance. But each individual trader should not expect to beat the market, because they don't know if they're one of the lucky ones.

> But each individual trader should not expect to beat the market In aggregate sure. But unless we believe that it's entirely random some individual investors can still certainly expect to beat the market, they just can't verify that in advance.

That’s not what “expect” means in statistics. If we’re rolling 100-sided dice (each person rolls once), no person should expect to roll a 1, even though 1% of people will in practice roll a 1. Likewise, no one should expect to beat the market, even though many will in practice.

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

#149

Post by ghaff »

jackcosgrove wrote: post #145
jacobsimon wrote: post #143

Earlier quoted context omitted.

One of my big brain investing ideas is to pick the stocks at the top of the index instead of buying the whole index. If index funds continue to rise in popularity, the stocks that are at the top will benefit most from passive investment volume. Plus, index funds follow a kind of Pareto principle where the top stocks contribute disproportionately to the total return anyway. As I’ve gotten older though, one of my reali…

I had an active manager reach out to me with exactly this strategy. I didn't look at the fees or rebalancing schedule super closely, because I didn't want to invest with the guy, but IMO his market-beating claims were due to increased concentration during a bull market (risk) which could go sideways fast if he didn't rebalance at opportune times.

Which, without looking, probably means NASDAQ today--and certainly the top 50 or whatever tech stocks by whatever metric. That didn't look so great in late 2001. Certainly my T Rowe Price tech fund cratered. Tech has been very good, even relatively speaking through the great recession, since then.

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

#150

Post by cess11 »

throwaway2037 wrote: post #86
rblatz wrote: post #36

Earlier quoted context omitted.

I have the same thoughts. Eventually there will be a lot of money to be made breaking the s&p 500.

Can you explain the "breaking" trade? And why haven't we seen more written about it?

Not sure what they mean specifically but you've probably seen a lot written about it, in terms of BRICS, the petrodollar, ARM in China, subsidies on electric cars, and so on.

Personally I try to avoid investing in the US for political reasons, besides the wishful expectation that the empire could fall within my lifetime and hence be a not so good investment.

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