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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)

#291

Post by HenryBemis »

wingworks wrote: post #267
Cthulhu_ wrote: post #182

Earlier quoted context omitted.

Anecdotally I can confirm there's been a few 40% years in the past decade, but it really is a gamble, and because of survivorship bias it's easy to only hear about the ones that gained and not the ones that lost.

I started my investing journey about 5 years ago, started with stock picking, and my average yearly return is... 4.5% p.a. I would've 100% been better of investing in a low fee index fund, like S&P500 (VOO), or even just a world ETF like VT. I picked some winners, like Microsoft / Google, both up 150%, but they're tiny fraction of my total portfolio, so hardly returned anything all counted up. I did 170% at one point…

Lore has it that SP500 doubles your money every 7 years. If someone is 60 and just started, well, it's not going too high.

But for someone who is 20something and begins placing $€200 per month in SP500 (preferably somewhere with the lowest possible fees), and does so every month for all the years he/she works, then there is a very nice surprise waiting for them (and their kids) later in life.

Keep in mind, investment funds don't die like our pensions, they are transferred 'down'. So even if someone has e.g. 200k when they have kids, by the time those kids turn 21, that 200k would have turned to 0-7yo 200k->400k, 7-14yo 400k->800k, 14-21yo 800k->1600k. It needs discipline and consistency though.

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

#292

Post by Terr_ »

gamepsys wrote: post #286
grepLeigh wrote: post #272

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…

> 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. Don't discount the knowledge you have from being deep into an industry. The higher quality of the CUDA toolkit compared to other SIMD languages, combined with it's increasing relevance in compute (gaming, followed by blockchain, followed by ML, followed…

> Don't discount the knowledge you have from being deep into an industry. [...] diverse portfolio

It's worth emphasizing that investing in the same sector that you are employed-in is actually a kind of anti-diversification, and it won't usually show up using "rate my portfolio" tools.

The archetypal example that comes to mind--unusually extreme but illustrative--would be all those Enron employees who invested their 401(k) funds straight into their own employer.

Consider these three scenarios:

1. If your investments plummet but you keep getting wages from you job, you can try riding it out until they recover.

2. If you become long-term unemployed but your investments stay normal, you can sell a little to cover the gap.

3. But if you can't work and your investments plummet, you may be forced to "sell low" quite a lot to cover immediate expenses, and the long-term outcome is much worse.

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

#293

Post by plasticchris »

HenryBemis wrote: post #291
wingworks wrote: post #267

Earlier quoted context omitted.

I started my investing journey about 5 years ago, started with stock picking, and my average yearly return is... 4.5% p.a. I would've 100% been better of investing in a low fee index fund, like S&P500 (VOO), or even just a world ETF like VT. I picked some winners, like Microsoft / Google, both up 150%, but they're tiny fraction of my total portfolio, so hardly returned anything all counted up. I did 170% at one point…

Lore has it that SP500 doubles your money every 7 years. If someone is 60 and just started, well, it's not going too high. But for someone who is 20something and begins placing $€200 per month in SP500 (preferably somewhere with the lowest possible fees), and does so every month for all the years he/she works, then there is a very nice surprise waiting for them (and their kids) later in life. Keep in mind, investment…

Can’t argue with the math but there are still risks (inflation, the government that issues your currency, etc). I’ve seen people sell all investments to buy all the supplies they need to live out their lives, and I used to think it was insane. But it is just a different sort of hedge.

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

#294

Post by Majromax »

mattmaroon wrote: post #279
carbotaniuman wrote: post #269

Earlier quoted context omitted.

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.

That’s very true, but he’s had the account for 30 years and assuming that means he started it young, 50% in bonds is borderline insane. It’s a lot more likely to cost you a large amount in retirement than bail you out in your 30’s.

Applying optimal portfolio theory to the long history of market returns suggests that the most risk-efficient allocation is something like 60% stocks and 40% bonds. The diversification reduces volatility faster than it reduces the overall return, so equity-like returns can be regained by using leverage on the portfolio.

Following this advice today is tricky thanks to the persistent yield inversion: you obviously can't improve returns by using short-term borrowing at 5% to invest in long-term bonds at 4%.

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

#295

Post by g15jv2dp »

Galanwe wrote: post #100
g15jv2dp wrote: post #61

Earlier quoted context omitted.

> On the contrary, these risk adjusted measures assume nothing more than a normally distributed random variable. The financial sector isn't yet so unrelated to reality that the price of securities is random.

I think when stating your opinion against 40 years of econometrical research, including multiple Nobel prizes in economy, you should feel enticed to explain your opinion a bit more than "no I don't think so"...

Please quote a Nobel prize (well, there's no Nobel prize in economy, but surely we understand each other) winner explaining that stock prices are, in actual reality, random variables.

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

#296

Post by dclowd9901 »

jbs789 wrote: post #210
dclowd9901 wrote: post #34

Earlier quoted context omitted.

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.

Thanks for the correction — I have no idea why I wrote it like that, it’s one of my favorite movies.

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

#297

Post by gamepsys »

Terr_ wrote: post #292
gamepsys wrote: post #286

Earlier quoted context omitted.

> 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. Don't discount the knowledge you have from being deep into an industry. The higher quality of the CUDA toolkit compared to other SIMD languages, combined with it's increasing relevance in compute (gaming, followed by blockchain, followed by ML, followed…

> Don't discount the knowledge you have from being deep into an industry. [...] diverse portfolio It's worth emphasizing that investing in the same sector that you are employed-in is actually a kind of anti-diversification, and it won't usually show up using "rate my portfolio" tools. The archetypal example that comes to mind--unusually extreme but illustrative--would be all those Enron employees who invested their 4…

1. It's normal in the tech industry to own a lot of stock in the company you work for. Investing in a vendor (in Nvidia's case) or another adjacent company is lower risk. You cannot avoid risk in investing, it's a natural part of the situation.

2. You can avoid the sell low situation by having 3-6 months of expenses saved in an emergency savings account. With all the layoffs in the last few years everyone should have gotten the message to do this. Even in a large downturn six months of expenses in a savings account is enough for you to re-skill and find new employment.

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

#298

Post by pembrook »

gamepsys wrote: post #297
Terr_ wrote: post #292

Earlier quoted context omitted.

> Don't discount the knowledge you have from being deep into an industry. [...] diverse portfolio It's worth emphasizing that investing in the same sector that you are employed-in is actually a kind of anti-diversification, and it won't usually show up using "rate my portfolio" tools. The archetypal example that comes to mind--unusually extreme but illustrative--would be all those Enron employees who invested their 4…

1. It's normal in the tech industry to own a lot of stock in the company you work for. Investing in a vendor (in Nvidia's case) or another adjacent company is lower risk. You cannot avoid risk in investing, it's a natural part of the situation. 2. You can avoid the sell low situation by having 3-6 months of expenses saved in an emergency savings account. With all the layoffs in the last few years everyone should have…

Just because everybody is doing it, doesn’t mean it’s rational.

The people who held onto their RSUs from being hired at Zoom during the height of the pandemic might not be so happy they chose to double down on their employment risk with investor risk.

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

#300

Post by milesvp »

lkdfjlkdfjlg wrote: post #261
ChrisMarshallNY wrote: post #133

Earlier quoted context omitted.

Yes. I contributed 50% to a bond fund, as well, but that is like, 10% of the total, nowadays.

> 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.)

You are thinking about it backwards. Humans have a tendency to buy high and sell low. It seems to be a psychological benefit of some sort that holds us back in abstract market scenarios.

By having a fixed percentage portfolio you are forcing yourself to sell high and buy low.

This was also the only basic strategy that mathematically beats the market based on papers I read during undergraduate (there may be others now). Basically, by splitting investments among higher and lower investments that are out of phase you can make sure that you are moving money out of an investment before it falls and into it before it rises.

What I find interesting is that the advantage only works with discrete periods of rebalancing. Instantaneous rebalancing doesn’t provide any advantage. I do not understand why but I saw a paper that showed that being able to take advantage of phase shifts in nearly correlated signals goes to zero as delta t goes to zero.

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