271–280 of 496 posts
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.
Whenever I'm tempted to buy individual high performing tickers (e.g. NVDA, TSLA, AMD), I restrict the purchase to no more than 2% of my portfolio and I only allow myself to bet on 2-3 "race horses" at a time. I think this fulfills the desire to gamble a little and see 100-200% YoY returns. NVDA cracked 300% cost basis when I finally sold, which is wild.
The reason I can do this is because the rest of my portfolio is a boring mix of low-fee ETFs that track major US and international indices. As a retail investor, it's good to remind myself that if I actually had the skills to invest professionally, someone would probably be paying me to do it for them.
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…
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Can you explain the "breaking" trade? And why haven't we seen more written about it?
Think of when George Soros broke The Bank of England for an example of the type of trade. There is a lot of demand for S&P 500 index , but that demand isn’t exactly tied to the fundamentals of the index, and the price isn’t tied to value of the underlying companies, it’s tied to demand of people looking to save money for retirement or a place to store a nest egg. This is an opportunity for price discovery to get thin…
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Right, risk is often fat tailed, but unless we enter an expert discussion, for which HN is hardly a good medium, it is safe to assume 99% of strategies out there yield normally distributed returns. Non normally returned strategies are rarer and sophisticated.
The level of discussion that HN is a good medium for has absolutely no bearing or causal relationship with whether or not the actual stock market is normally distributed. Imagine really thinking that the nature of a discussion forum can somehow influence the distribution of stock prices, as if stock prices examine comments on the Internet to determine their behavior.
Attacking the comment with sarcasm isn't in the spirit of HN even if you think that is a dumb idea.
Disclaimer: I'm not a financial advisor. Whenever I'm tempted to buy individual high performing tickers (e.g. NVDA, TSLA, AMD), I restrict the purchase to no more than 2% of my portfolio and I only allow myself to bet on 2-3 "race horses" at a time. I think this fulfills the desire to gamble a little and see 100-200% YoY returns. NVDA cracked 300% cost basis when I finally sold, which is wild. The reason I can do thi…
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> You can't tell beforehand which participants will beat the market, even having full knowledge of their strategies and skill I never implied that I can. That fact doesn't prove that it's somehow fundamentally impossible to do that. The problem is that it's impossible to tell if you "strategy" is working until a significant amount of time passes and by that point the markets conditions might have changed to such an e…
It must have been nice in the early 2010s to be so smart to predict AI would be a huge hit (after a couple previous AI winters) and that GPUs would be the key and that NVIDIA specifically would reap the benefits. But I'm sure you're smarter than me and a lot of other people. And AMD also did pretty well during much of that same period although I sadly sold my modest holdings after they went nowhere for years after sp…
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> I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays. That's one of the ridiculous aspects of fixed-percentage allocations: by constructions those allocations tell you that you should get rid of the things that are making you the most money, and put it into the things which are underperforming instead. (I get that you didn't do that, I'm just got reminded of it.)
The tradeoff is you lock some of those gains down in safer assets. Probably the wrong choice for retirement earlier on, but if you need money during an economic crisis, say you got laid off, then that might change how it's viewed.
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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.