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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)

#31

Post by Galanwe »

elil17 wrote: post #11
decasia wrote: post #4

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.

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 more dimensions to an investment than average returns.

Volatility adjusted returns (or Sharpe ratio) for instance, will tell you how much returns you have per unit of risk you take. This is important because getting 10% average annual returns with 10% annual volatility is worst than getting 5% returns with 1% annual volatility. You can only compare investments at equal amount of risk.

An other factor to take into account is diversification. If you have an alternative investment to compare to your base, and it's average returns is lower than your base, but it is un correlated, then you actually get an increased volatility adjusted average returns by investing in both.

That's just two dimensions to take into account, there are many others, but overall:

- Don't compare investments based on annualized returns alone, it really doesn't make any sense.

- Don't compare investments one against an other, instead look at the addivity of one on top of another.

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

#32

Post by gizajob »

wenc wrote: post #17
decasia wrote: post #4

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.

The common refrain is that "time in the market always beats timing the market". The implicit assumption in that refrain is that, despite periodic dips, the U.S. stock market always goes up over time. This has been true since the Great Depression (see graph of S&P 500 since 1929) https://www.officialdata.org/us/stocks/s-p-500/1929 The implicit assumption behind that is that the American economy always invents a way to…

It’s also just capitalism and fiat currency - in a world where the money supply has to inflate, the prices in the market have to go along with it.

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

#33

Post by gizajob »

danielmarkbruce wrote: post #20
decasia wrote: post #4

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.

It's sort of self evident - if you are freakishly capable of spotting mispriced securities in a market full of smart hard working people who are paying attention, you can do better than average. If you aren't freakishly capable... you cant. It's sort of like "does playing pro golf make sense?".

They’re only mispriced until they’re not though, or they’re priced well until they’re suddenly mispriced. That is the say the market is an evolving system varying on the time axis - that things are mispriced assumes that time isn’t rolling along and new events don’t happen and new information doesn’t arrive. Everything’s price today is just a guesstimate until tomorrow’s guesstimate following some new data. Granted it’s not like the past where whole companies were sitting there underappreciated because of a lack of analytics, but at the same time coming out of covid companies like Rolls Royce (makes aircraft engines) had their prices crash completely, then were demonstrably “mispriced” for ages and are still recovering now air travel is back to 2019 levels. But the price wasn’t mispriced when the planes weren’t flying, just cheap to those who believed covid would get sorted eventually and the debt RR took on to survive would get repaid.

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

#34

Post by dclowd9901 »

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.

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

#35

Post by nxobject »

hindsightbias wrote: post #8

Fund was up to $55B in 2022, but they made him take a roomie https://thenevadaindependent.com/article/lawmakers-approve-d...

Oh, that's funny... apparently to reduce the risk of there just being one person.

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

#36

Post by rblatz »

theK wrote: post #30
throwaway2037 wrote: post #15

Earlier quoted context omitted.

But why stress about beating the market? Just be the market with an ETF that tracks the S&P 500 index. Literally, setup auto invest from your paycheck. Go to sleep (Rip van Winkel style). Wake up 40 years later and retire comfortably. Look at total returns over the last 40 years on the most popular indices in the world. S&P 500 crushes them all. I see a lot of "Internet advice" recommending various MSCI world indices…

Sometimes I wonder whether ETFs that track top valuation will lead to some weird stickyness and overvaluation in say, S&P500.

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

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

#37

Post by throwaway3306a »

asdasdsddd wrote: post #12
decasia wrote: post #4

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.

The catch 22 for active management is that if they are actually good then they would just use their strategies to manage their own money.

The catch 22 for this assumption is that they want to be richer than their own money would allow

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

#38

Post by 317070 »

wenc wrote: post #17
decasia wrote: post #4

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.

The common refrain is that "time in the market always beats timing the market". The implicit assumption in that refrain is that, despite periodic dips, the U.S. stock market always goes up over time. This has been true since the Great Depression (see graph of S&P 500 since 1929) https://www.officialdata.org/us/stocks/s-p-500/1929 The implicit assumption behind that is that the American economy always invents a way to…

That is too strong of a condition. The economy doesn't need to grow for passive investing to work.

Even when the economy is flat, passive management works. As long as companies are economically productive, capitalism will hand over a chunk of the profits to the owners of the capital.

Of course, growth increases the size of that chunk year over year, but capitalism doesn't stop when growth stops.

Active investing is when you are looking to exceed this passive margin by timing your trades well. Active investing requires changes in productivity (such as growth).

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

#39

Post by Mathnerd314 »

blcknight wrote: post #25
djkivi wrote: post #9

Fidelity: Successful investors forget they have an account: https://www.bogleheads.org/forum/viewtopic.php?t=146347

Until it gets liquidated and the cash put into state lost money accounts because of escheatment rules. You should still login once a quarter or so. https://www.investopedia.com/ask/answers/110415/what-are-dor...

> The dormancy period for IRAs cannot begin until the account owner reaches the age at which one must begin taking required minimum distributions. As of 2023, the required minimum distribution age is 73.

So not until you retire.

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

#40

Post by recursive »

djkivi wrote: post #9

Fidelity: Successful investors forget they have an account: https://www.bogleheads.org/forum/viewtopic.php?t=146347

I've been harboring a suspicion for several years that I've forgotten an account or two. Maybe I'm one of the fidelity investors.
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