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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)

#71

Post by [deleted] »

throw0101d wrote: post #69
djkivi wrote: post #9

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

Your link has John O'Shaughnessy being interviewed by Barry Ritholtz (two respected folks in finance), and O'Shaughnessy later corrected himself: * https://twitter.com/jposhaughnessy/status/115517108366392524... While I do believe set-and-forget passive investing is best for the vast majority of people, last time I checked that Fidelity study does not actually exist, and the story is apocryphal (no one seems to be ab…

[deleted]

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

#72

Post by StackRanker3000 »

personjerry wrote: post #44
elil17 wrote: post #11

Earlier quoted context omitted.

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 strong evidence no individual trader can expect to beat the market. I don't understand that. If you just bought Apple instead of SPY 20 years ago wouldn't you be doing great?

Individual traders beat the market all the time, it’s not impossible. But you can’t expect to do it reliably, because in practice it’s essentially gambling, unless you’re Warren Buffett, or those firms that utilize sophisticated quantitative or algorithmic trading.

So for all intents and purposes, the takeaway for regular investors should be that they cannot expect to beat the market (but they can gamble on it if they like).

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

#73

Post by StackRanker3000 »

qwytw wrote: post #67
satvikpendem wrote: post #52

Earlier quoted context omitted.

It is on average, not from cherry picked examples.

That claim is not phrased like that, so why would we interpret that way? > average So what? It's like saying that since an average person can't run a marathon it wouldn't make sense for any individual to even try it. How does that make sense? > cherry picked If we agree that 50% of all investors can't beat the market, what proportion can? 1%, 10%, 30%? Because there is a massive difference. How do we even define that…

You’re missing the word ”expect” in the original claim.

You can beat the house at blackjack, but you can’t reliably expect to do it.

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

#74

Post by 317070 »

kjksf wrote: post #59
317070 wrote: post #38

Earlier quoted context omitted.

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 w…

Returns from stock investing come from increasing stock prices. Stock prices increase when earnings of the company grow. In other words: when the economy grows. You can argue that Amazon and Apple and Google and Facebook etc. will grow earnings even if the overall economy is flat or shrinks but I don't see how that would apply to passive investing i.e. investing in S&P 500 i.e. investing in 500 largest US companies.…

> Returns from stock investing come from increasing stock prices.

There are other ways to make returns. Return from stock comes mainly from increasing stock prices and from dividends. But fundamentally, it comes from profits.

> Stock prices increase when earnings of the company grow.

There are many reasons stock prices increase. But whether it does or doesn't isn't really relevant.

When a company makes a profit, either:

* the profit is reinvested, the value of the company grows and the stock price grows, making a return for the passive investor

* the profit is returned as dividends, making the passive investor a return as well.

No growth needed for the individual companies either. As long as they are profitable, they make a steady return for the passive investor.

Thought experiment: imagine a company which is going to make 1 dollar of profit per year for all eternity, which it returns as dividends. For an investor with a discount rate of 95%, that company is worth 20 dollars. Say he buys the company for 20 dollars. After 10 years, that company is still worth 20 dollars, as eternity is still eternity, but the passive investor owning the company has made 10 dollars from the company.

As you can see, the passive investor made a return, despite the company only being profitable, but not growing nor shrinking.

You will make a return on your investment when your investment makes a profit, that is capitalism. Whether the profit is increasing, decreasing, flat or going in circles does not really matter, as long as it is a profit and not a loss.

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

#75

Post by qwytw »

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…

> time in the market always beats timing the market > The implicit assumption in that refrain is that,

Only if you were fine with waiting 50-100 years. The market in 1950 was more or less at the same level in real terms as in 1906, of course dividends were way higher back in those days. If we take that into:

e.g. if you invested 200$ in S&P 500 in 1906 adjusted by inflation in 1950 you would have had ~$1570 in 1950. Which is an average annual return of ~4.7% which is not terrible but you would have made approximately the same by buying high grade corporate bonds just with way less volatility.

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

#76

Post by cess11 »

kjksf wrote: post #59
317070 wrote: post #38

Earlier quoted context omitted.

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 w…

Returns from stock investing come from increasing stock prices. Stock prices increase when earnings of the company grow. In other words: when the economy grows. You can argue that Amazon and Apple and Google and Facebook etc. will grow earnings even if the overall economy is flat or shrinks but I don't see how that would apply to passive investing i.e. investing in S&P 500 i.e. investing in 500 largest US companies.…

For me returns on personal investment in stocks, funds and ETF:s consist largely of dividends.

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

#77

Post by jefftk »

qwytw wrote: post #63
elil17 wrote: post #11

Earlier quoted context omitted.

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…

> picking stocks yourself, the answer is also pretty cut and dry. There’s strong evidence no individual trader can expect to beat the market. Is there? It would make sense if an average individual trader can't expect to beat the market. Claiming that there are no individual investors who did/can do that over a reasonably long period is both objectively false and rather absurd.

We expect some individual traders to beat the market (and some to do much worse than the marker); that's variance. But each individual trader should not expect to beat the market, because they don't know if they're one of the lucky ones.

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

#79

Post by thevillagechief »

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.

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

#80

Post by TrainedMonkey »

taraparo wrote: post #70
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 is the opposite. Market timing does not work reliably. Active management produces worse results on the long run. no individual trader or active manager can consistently beat the market. however active fonds may have periods (even several years) where they out perform. for private investors buy-and-hold of highly distributed ETFs is the best way to do it. The easiest way to get started is a one ETF portfolio like e…

Noting that it is possible to beat market, with strategies / algorithms that are generally non-public. For example medallion fund, see https://posts.voronoiapp.com/markets/Jim-Simons-Medallion-Fu... . Note that these crazy performance stats are after the steep fixed + performance fees.
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