Pdxwayne
Major Contributor
- Joined
- Sep 15, 2020
- Messages
- 3,219
- Likes
- 1,180
Risk and reward. Investing 101.
-
Welcome to ASR. There are many reviews of audio hardware and expert members to help answer your questions. Click here to have your audio equipment measured for free!
The wealth-building thread
- Thread starter JeffS7444
- Start date
Over 10 years? You're wrong. There's no such thing as a bad strategy that out-performs the market over 10 years.
It only loses post load. The not #1 growth fund still beats QQQ over ten years. The higher ranked growth funds do even better.
The other thing you need to look at is "risk adjusted" returns. If you look at a fund of "high beta" stocks over the last 10 years of course it will outperform the S&P 500.... but that is just higher risk in an up market and will underperform in a down market.
Loads don't count? The reason an active fund will lose out 99% of the time to a passive fund is because of loads and fees. Since no one has ever been proven to reliably predict the future at the end of the day the "extra charges" will mean an active fund will under performance a passive fund.
Risk is a subjective assessment. Returns over 10 years are measured facts. Hmmm... this quandary sounds familiar...
Loads do count, however in this case the difference is about 0.2%. The reason to look at the pre-load return is to judge the managers' strategy. There are also other factors, like whether or not the fund is held in a taxable account and throwing off annual long and short-term capital gains. For any of this actively managed funds these realized gains can be more of an annoyance by far than the loads. If the Democrats are successful in changing the tax laws this year for capital gains it might cause a lot of people to divest from actively managed funds.
Portfolio theory measures risk all the time. It is a mathematical equation that measures volatility... the higher the volatility the higher the risk. You can argue that the "real" number is "expected future volatility" which is unknown but "historical volatility" is good enough for most uses.
OP
- Joined
- Jul 21, 2019
- Messages
- 3,024
- Likes
- 4,400
- Thread Starter
- #429
Bill Miller may hold the record (15) for consecutive years outperforming the S&P 500, but even the smartest people make mistakes sooner or later.
Not for me. I like forward-looking strategies, not historical analyses. But this sub-thread is just a response to the statement that passive funds out-perform managed ones, and my response was "not always". The rest of this discussion is just rhetoric.
Pdxwayne
Major Contributor
- Joined
- Sep 15, 2020
- Messages
- 3,219
- Likes
- 1,180
Say that again to all the growth investors who invested heavily in tech stocks before 2000. Sure, the "facts" from 1990 to 2000 should continue....
sorry, that is just incorrect, it is entirely possible randomly.
And, again, wrong benchmark
That was a great bubble. Fortunately I didn't get caught it in much, except for the stock options from my employer at the time. The resulting hangover was why many companies have switched to RSUs from options, at least for those below C-suite levels.
I'm on my way out the door to physical therapy appt (bulging disc) and then I'm packing for my NY trip tomorrow (niece getting married this weekend
In the meantime, think about it and why it may or may not be a solid concept. I'd love to hear opinions.
Congrats to your niece; wishing her many years of happiness. As for your bulging disc, damn that sucker to hell!
Get well.I suppose that GDP per capita could be an interesting metric to use, as that metric is commonly used to gauge a country's standard of living. And I suppose the purpose of minimum wage is to ensure a minimum standard of living.
Enjoy your trip; I'll continue to ruminate...
As you wish, you go your way and I'll go mine.
I just ran that Fund's performance on Bloomberg - the vast majority of its outperformance came in the last two years.
This goes to *persistence* of outperformance, something academics repeatedly find doesn't exist in equities. Compressed outperformance can be a warning. Here's a good place to start learning about it:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3099723
Now, there actually *is* literature claiming that some fund managers have discernible skill. But they do not make their case by citing a random fund whose excess returns are dominated by the last two years.
We should apply the same evidential rigor to these claims as those about audible differences between cables and DACS, because the current evidence is just as lopsided.
This goes to *persistence* of outperformance, something academics repeatedly find doesn't exist in equities. Compressed outperformance can be a warning. Here's a good place to start learning about it:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3099723
Now, there actually *is* literature claiming that some fund managers have discernible skill. But they do not make their case by citing a random fund whose excess returns are dominated by the last two years.
We should apply the same evidential rigor to these claims as those about audible differences between cables and DACS, because the current evidence is just as lopsided.
Interesting choice of towns, that's where my son just bought a house (in the pandemic) with his new bride. Lovely place.
Even Warren Buffett is not doing so hot.... trailing the S&P for 5, 10, and 15 years.
https://www.cnbc.com/2021/01/08/how...ll-battle-against-the-sp-500-is-changing.html
He's fortunate. Recent sales in Fairhaven were all subject to escalation clauses, where the listing price was just the "reserve" before bidding began in earnest.
Steepest town I ever visited, and I lived in Vail (a lifetime ago).
Similar threads
