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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)

#201

Post by WillPostForFood »

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…

There is an old strategy that is kind of the inverse of this this called Dogs of the Dow where. You buy with stocks with the highest dividend-to-price ratio (implicitly underperforming), looking for the rebound.

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

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

#202

Post by dkekenflxlf »

So, for SURE it is possible to beat "the market", but:

- strategy is limited up to max 1mio per account (well, maybe 2 pr 3)

- you need a tailored software, tools like MT/et al wont help you

- with a leverage of 5-10, its possible to achieve gigantic returns

- system needs to be capable of going short as well

- your individual application should abstract-away all dauly charting&news noise: what counts is statistics and propability only, do not check CNN et al

EDIT: - this approach cant be done by ANY institutional corp due to regulations, so they are not doing it

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

#203

Post by bityard »

ProjectArcturis wrote: post #158
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…

The point of actively managed funds is not so much to "beat the market", it's to provide diversified returns via strategies that are uncorrelated with the market. On average, the S&P500 has returned about 7% annually. If I had a strategy that returned 5% on average but was totally uncorrelated with the S&P, then you'd get the best overall long-term returns (maximize the geometric average of annual returns) by investi…

I want to agree with you, except that almost all of the salescritters for these products promote them as "beating the market." They _have_ to sell them this way because if their customers had any idea what the whole-market returns actually were, they wouldn't pay extra for the privilege of a far riskier (and lower-performing, on average) investment.

And the S&P 500 returns more like 10% per year. A bit higher if you cherry-pick your start and stop dates. I've only seen people use 7% for portfolio value estimation purposes, after adjusting for an assumed 3% inflation.

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

#204

Post by Maxatar »

ProjectArcturis wrote: post #158
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…

The point of actively managed funds is not so much to "beat the market", it's to provide diversified returns via strategies that are uncorrelated with the market. On average, the S&P500 has returned about 7% annually. If I had a strategy that returned 5% on average but was totally uncorrelated with the S&P, then you'd get the best overall long-term returns (maximize the geometric average of annual returns) by investi…

This is a kind of revisionism that mostly took off after Warren Buffet won his bet that hedge funds would not outperform the market over a 10 year time period.

The original goal and selling point of hedge funds was to produce consistent results regardless of the market's performance by using long and short positions to provide absolute returns in any market environment.

With that said, even if you accept the revisionism, it's untrue that actively managed funds are uncorrelated with the market. What is true is that selection bias makes it seem like they are since when interest rates rise and markets go through a down swing, the majority (and yes I mean more than 50%) of hedge funds go out of business. As such the only hedge funds that remain are the ones that happened to weather the storm so to speak.

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

#205

Post by bityard »

darkwizard42 wrote: post #200
dukeofdoom wrote: post #198

Earlier quoted context omitted.

Is the 7% post inflation?

No, it is likely the rate of return. There is generally no such mention of inflation in investment returns. The alternative to investing your dollar is to put it in a treasury (inflation tracked), so you can compare the value of your money against that as the lowest risk (the US defaulting) vs. other forms of risk.

No need for "likely," it's easy to look up: https://www.nerdwallet.com/article/investing/average-stock-m...

The average return of the S&P 500 is around 10%, although you will see people use 7% as a shortcut to account for inflation when estimating the future value of their portfolios.

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

#206

Post by Maxatar »

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.

That's right, fund managers expect their clients to take 100% of the downside risk and tax their clients 20% on the up side.

Where I disagree with you is that fund managers regularly take risk. They never take risk themselves, rather they supply all of the risk to their clients.

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

#207

Post by bityard »

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...

Index funds are not some clever hack, they are just tracking the combined productivity of the publicly traded companies that make them up. Whole market, or the top 500 as a representative slice, whatever. When you buy the whole US market for example you are saying, "I strongly believe that the overwhelming majority of companies in the US want to make shitloads of money and pass it down to themselves and their shareholders."

Index funds will never bring down the market as long as individuals and companies are allowed to trade individual stocks at prices of their choosing. There will _always_ be someone who thinks a particular stock is overvalued or undervalued. Those people set the prices.

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

#208

Post by jbs789 »

dkekenflxlf wrote: post #202

So, for SURE it is possible to beat "the market", but: - strategy is limited up to max 1mio per account (well, maybe 2 pr 3) - you need a tailored software, tools like MT/et al wont help you - with a leverage of 5-10, its possible to achieve gigantic returns - system needs to be capable of going short as well - your individual application should abstract-away all dauly charting&news noise: what counts is statistics a…

Can you elaborate on the regulations preventing corp implementation here please?

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

#209

Post by [deleted] »

bandyaboot wrote: post #113
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…

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.

[deleted]

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

#210

Post by jbs789 »

dclowd9901 wrote: post #34
AlbertCory wrote: post #10

> “Doing nothing is harder than it looks” He means that when people are screaming at you to do something because the market's tanking, you earn your salary by yawning and saying, "No, I think we're good."

Reminds me of that scene in The Long Short where Michael Burry is hemorrhaging money on the bet against CDSes and basically everyone has completely turned on him.

*The Big Short, for anyone curious.
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