Nevada’s public employee pension fund invests passively and beats peers (2016) • Hacker News Board

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

#481

Post by bulletsvshumans » Tue, Jul 16, 2024, 10:51 PM UTC

chii wrote: post #351

throwaway2037 wrote: post #323

Earlier quoted context omitted.

Bond funds are weird to me because you cannot hold to maturity to realize yield-to-maturity. The only point to them is to get coupon payments. Is your bond fund total return or, if not, what do you do with the coupon payments? To me, it just seems better to buy outright mix of 2yr and 10yr US treasuries and always hold to maturity.

> just seems better to buy outright which is fine, but you're just adding administrative burden on yourself. The bond fund is doing exactly what you're trying to achieve, except that they reinvest the bond capital back into new bonds when they mature. You get the coupon payment as income, and you sell the bond fund when you want capital back. The price of the bond fund is a reflection of the value of the bond at mark…

Everything you mention is correct, I just wanted to add that holding bonds directly makes sense in the case when you have a date in mind for when you will need the invested money. So for instance if you plan to buy a car in 2 years buying bonds that mature in 2 years has the nice property of being worth a guaranteed amount of money exactly at the point you need those savings. There are etf equivalents known as “bullet shares” but these have an expense ratio that isn’t incurred with owning bonds directly.

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

#482

Post by throwaway2037 » Wed, Jul 17, 2024, 1:26 AM UTC

Majromax wrote: post #410

throwaway2037 wrote: post #326

Earlier quoted context omitted.

I am not sure that anyone recommends that 22 year olds put 40% of their retirement portfolio in bonds! That is insanely conservative.

That's where leverage comes in. Under more ordinary conditions, the 22 year-old would have something like 80% in equities and 50% in bonds, using leverage to have a net 130% invested. Under current conditions, that allocation is more questionable. The yield inversion means that the expected value of a leveraged bond investment is about zero (borrowing at a higher short-term rate to lend at a lower long-term rate), so…

Where do you get the leverage and what does it cost? To be clear: Leverage isn't free. It is borrowed money -- financing -- for your positions. For most retail people, they will struggle to pay less than 5% per year, and usually much more. Here is a list of margin rates from Interactive Brokers: https://www.interactivebrokers.com/en/trading/margin-rates.p...

A never once, did I am read any sensible long-term retail strategy that recommended the use of leverage, let alone persistent leverage. This is a strange post.

What does your portfolio look like?

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

#483

Post by throwaway2037 » Wed, Jul 17, 2024, 1:28 AM UTC

bulletsvshumans wrote: post #481

chii wrote: post #351

Earlier quoted context omitted.

> just seems better to buy outright which is fine, but you're just adding administrative burden on yourself. The bond fund is doing exactly what you're trying to achieve, except that they reinvest the bond capital back into new bonds when they mature. You get the coupon payment as income, and you sell the bond fund when you want capital back. The price of the bond fund is a reflection of the value of the bond at mark…

Everything you mention is correct, I just wanted to add that holding bonds directly makes sense in the case when you have a date in mind for when you will need the invested money. So for instance if you plan to buy a car in 2 years buying bonds that mature in 2 years has the nice property of being worth a guaranteed amount of money exactly at the point you need those savings. There are etf equivalents known as “bulle…

Hat tip on bullet maturity ETFs. I never heard of this before your post.

Ref: https://www.etf.com/topics/bullet-maturity

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

#484

Post by throwaway2037 » Wed, Jul 17, 2024, 1:31 AM UTC

JamesBarney wrote: post #353

throwaway2037 wrote: post #320

Earlier quoted context omitted.

> You can avoid the sell low situation by having 3-6 months of expenses saved in an emergency savings account. I see this (3-6 mos savings) constantly quoted in basic personal mgmt blog posts, but it seems unrealistic for most. Seriously, what percentage of people in OECD can do this? Surely, less than 5%. I am not sure it is great advice because it is discouragingly unrealistic for most. The average person has out o…

It's unrealistic for people who have no money to invest. But the top 5% in the US make 300k+. If you can't save anything making 300k you have a spending problem. Honestly I'd you're making 100k can can't save you have a spending problem.

It is interesting that you cofounded two points from my point to assume that I meant the top 5% of earners in the US. No, I have see personal finance Q&A from all income levels where people have out of control spending. I think this is the norm in the US.

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

#485

Post by thevillagechief » Wed, Jul 17, 2024, 2:26 AM UTC

embwbam wrote: post #441

thevillagechief wrote: post #79

It was Richard Thaler's Misbehaving: The Making of Behavioral Economics book that finally broke through my thick, anxiety ridden skull and convinced me to stop reading economic news everyday and just forget the the retirement accounts existed. If I'd read that book earlier, I'd be up 3X on my positions.

What about the book made the difference? I'm 100% convinced that it's better to do as you say, and forget about the accounts, and also unable to resist the temptation to check them every day. I'm constantly tempted to make changes.

The full analysis is too long to go on here, but on the chapter "Narrow Framing on the Upper East Side has this conclusion: "The implication of our analysis is that the equity premium - or the required rate of return on stocks - is so high because investors look at their portfolios too often. Whenever anyone asks me for investment advice, I tell them to buy a diversified portfolio heavily tilted toward stocks, especially if they are young, and then scrupulously avoid reading anything in the newspaper aside from the sports section. Crossword puzzles are acceptable, but watching cable financial news networks is strictly forbidden." Of course there's the usual caveat about rebalancing as you approach retirement, basically the target date strategy. Really, the book gives great context into just how irrational we humans are. It has lots of studies, examples and anecdotes on behavioral economics. It was the book that actually helped me make sense of sunken cost fallacy.

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

#486

Post by wslh » Wed, Jul 17, 2024, 9:01 AM UTC

ghaff wrote: post #401

wslh wrote: post #306

Earlier quoted context omitted.

1000% but when it is the right time (per fundamental analysis). For example around the subprime crisis companies such as Microsoft had a low PE ratio and the average person thought that Microsoft was a loser vs. Apple and Google. Microsoft has a resilience track record that would be the envy of most companies and .NET was a real thing. I also remember other companies such as Globant that has a lower PE price vs. simi…

Microsoft has actually been a nice investment if you bought in the latter 2010s. I don't remember why I did. Probably I liked what Nadella was doing.

I bought it within the subprime crisis because of the simple PE ratio and deep technical knowledge of Microsoft [1].

[1] https://www.nektra.com/main/2020/01/12/reflecting-on-16-year...

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

#487

Post by throwaway2037 » Wed, Jul 17, 2024, 10:22 AM UTC

wingworks wrote: post #332

throwaway2037 wrote: post #329

Earlier quoted context omitted.

Thanks for the assumed honest post. How are your returns after switching to indexed?

Up 13% since March. (I only recently switched to index funds, so far it's good)

I hope you don't think that type of return is normal. Anything, sustained, over 1% should make use suspicious. Really, that would be 12% per year. That is excellent return over the long run. We are in a mini-bubble, thanks to the Magical Six.

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

#488

Post by refurb » Wed, Jul 17, 2024, 5:27 PM UTC

lkdfjlkdfjlg wrote: post #477

refurb wrote: post #476

Earlier quoted context omitted.

Yes, have you? It’s pretty clear high performing company don’t maintain it.

I'm talking about the index. No, you haven't. Because if you did, you woulnd't be looking at an exponential and saying "but but but it reverts!!!!"

Please give me an example of a company that has consistently produced annual return higher than the SP500 average over 50+ years (hell, 20+ years).

The answer is there are none. Company tend to have stretches of very high returns, followed by flat or decreasing periods.

So what most people do - buy a stock that has already gone up a lot, are basically buying high and selling low.

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

#489

Post by Etheryte » Wed, Jul 17, 2024, 8:11 PM UTC

jacobsimon wrote: post #467

Etheryte wrote: post #450

Earlier quoted context omitted.

You can pull up SP100 and SP500 and look at their historical returns. SP100 is an actual index, not something I made up for illustration. If you look at the last 40ish years, SP100 is up roughly 45 times, SP500 is up roughly 50 times. What might help understand this concept intuitively is if you take it to the extreme: what if you always held only the very first company of the SP500. Sure, you would have a lot of the…

Sorry I know what you mean - I’m just having trouble finding any data source / website that shows useful comparisons going back that far - what website are you looking at? These are the 10 year returns I’m seeing according to S&P: S&P 500: 11.1% S&P 500 Top 50: 13.2% S&P 500 Top 10: 18.1% The trend is pretty clear, at least in the last decade. My other point was that the historical data may not be as relevant because…

I use IBKR for data, but you could also get ticker data from Yahoo Finance or other similar sources, albeit manually since they don't have an API afaik. A simple although simplistic way to backtest ideas like this is Portfolio Visualizer [0], you need an account, but a free one should work. I've uploaded a screenshot of a sample run where the top company in SP500 was held for a year and then swapped out if needed on an annual basis [1]. There's a few things I'd like to highlight.

Firstly, for a considerable majority of history, often for years at a time, holding the top one company, I'll just call it SP1, underperforms the index. The maximum downturn for the SP1 was 79% and I think very few people could stomach holding that for years at a time, hoping things will improve.

Secondly, pretty much the only reason the SP1 strategy comes out on top is the fact that AAPL has gone up about ten times (!!) in the last decade or so. Whether that's the new norm in the markets or an absolute anomaly I'll leave up to you. In short, the only real reason the SP1 strategy has looked favorable, and I suspect the same holds for the SP10 and SP50 if you backtested them, is that Apple has seen its value skyrocket.

Needless to say that none of this is investment advice etc.

[0] https://www.portfoliovisualizer.com/backtest-dynamic-allocat...

[1] https://ibb.co/st8mmq0

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

#490

Post by wingworks » Thu, Jul 18, 2024, 12:41 AM UTC

throwaway2037 wrote: post #487

wingworks wrote: post #332

Earlier quoted context omitted.

Up 13% since March. (I only recently switched to index funds, so far it's good)

I hope you don't think that type of return is normal. Anything, sustained, over 1% should make use suspicious. Really, that would be 12% per year. That is excellent return over the long run. We are in a mini-bubble, thanks to the Magical Six.

Oh yeah, I'm well aware these are very high returns, and chances are high that we'll soon get a year of -30% or the like, as the average p.a. return over 25 years is usually ~7-10%, depending what timeframe you mesure. (ex fees and tax)

I'm under no illusion that this will continue going forward.