|
I'm about ready to max out my IRA for 2014 and I'm trying to decide whether or not to open an account with Vanguard this year instead of Sharebuilder, who I have used for the past 3 years. I haven't had any problems with Sharebuilder, per se, and that it is tied into my taxable brokerage account as well as my online savings account is a nice benefit. But I'm drawn to Vanguard as more of a longer-term brokerage to use as well as the great selection of cheap funds. Sharebuilder isn't killing me in fees though, since trades are $4 if "automated" or $6.95 regularly and I have pretty much just done one or two bulk purchases each year. Right now the account is mostly just SPY and AAPL. Yes I know holding individual stocks in an IRA is risky, but I'm young, single, and also max out my 401 and HSA in balanced funds so I'm okay with carrying that risk for now. One obnoxious thing is that Sharebuilder apparently charges $15 for cash plus $15 per security (up to $75) for an IRA transfer. Maybe that's normal, and ultimately isn't a huge cost, but obnoxious nonetheless. It'd be nice to be able to transfer funds from SB to Vanguard so I could buy in to Admiral-class shares right away, but that's a minor thing. I guess that wasn't really much of a question, but should I just make the jump to Vanguard this year and start contributing to them going forward? I don't mind letting the Sharebuilder account just sit there for a while and maybe someday getting around to transferring it when I want to just dump it all into Vanguard funds.
|
#
?
Jan 2, 2014 22:21
|
|
|
|
| # ? May 23, 2024 17:45 |
|
|
Guinness posted:I'm about ready to max out my IRA for 2014 and I'm trying to decide whether or not to open an account with Vanguard this year instead of Sharebuilder, who I have used for the past 3 years. A lot of deserved love gets thrown Vangaurd's way, though it is mostly from people who also buy into Vangaurd's funds which really limits fees of all kinds to a minimum. If you're holding/trading individual stocks in those accounts however, the choice may be less clear cut. But yeah Vanguard has been awesome.
|
|
#
?
Jan 2, 2014 22:33
|
|
|
Yeah that's the thing, going forward I think I'm going to just invest in funds in my retirement accounts and keep my individual stock investing (or gambling, if you prefer) in my taxable account. I already started doing that last year when I just bought all SPY with my 2013 contribution. Hence why I'm thinking of opening an account with Vanguard. But it's not like I'm getting killed with fees on Sharebuilder, either, since, for example, the SPY ETF only has an ER of 0.09% and costs me $4 to buy in once per year. Just wondering if all the hype is worth it. Guinness fucked around with this message at 22:38 on Jan 2, 2014 |
|
#
?
Jan 2, 2014 22:36
|
|
|
Guinness posted:Yeah that's the thing, going forward I think I'm going to just invest in funds in my retirement accounts and keep my individual stock investing (or gambling, if you prefer) in my taxable account. I already started doing that last year when I just bought all SPY with my 2013 contribution. Hence why I'm thinking of opening an account with Vanguard. Well, the expense ratio is lower at Vanguard and they charge you $0, so the hype is worth it if your goal is keep more of your money. Have you read the Four Pillars yet? A few of your investing habits have entire chapters dedicated to their shortcomings.
|
|
#
?
Jan 2, 2014 22:47
|
|
|
Guinness posted:Yeah that's the thing, going forward I think I'm going to just invest in funds in my retirement accounts and keep my individual stock investing (or gambling, if you prefer) in my taxable account. I already started doing that last year when I just bought all SPY with my 2013 contribution. Hence why I'm thinking of opening an account with Vanguard. The Vanguard S&P 500 ETF (VOO) has a 0.05% expense ratio and there are no fees or commissions for buying Vanguard ETFs in accounts held with them. Their site is really slow for me at the moment so I can't find their commissions schedule for non-Vanguard ETFs, but IIRC there's not much difference between VOO and SPY as they track each other nearly exactly.
|
|
#
?
Jan 2, 2014 22:50
|
|
|
GoGoGadgetChris posted:Have you read the Four Pillars yet? A few of your investing habits have entire chapters dedicated to their shortcomings. Incidentally, it is in the mail right now. Sounds like I'll make the switch to Vanguard.
|
|
#
?
Jan 2, 2014 22:52
|
|
|
Guinness posted:Incidentally, it is in the mail right now. It's an excellent book. I would recommend reading through it before you do your transfers and contributions. If you got the current edition, it hasn't actually been "updated" in any way, but there are about 12 pages at the very end that were written in 2011 and reiterate a few of his major points. On a personal note, I think even Bernstein over complicates retirement investing. His diversification timeline for the first several years of investing will involve REITs, precious metal funds, and some other stuff that seems a bit overkill.
|
|
#
?
Jan 2, 2014 22:57
|
|
|
GoGoGadgetChris posted:On a personal note, I think even Bernstein over complicates retirement investing. His diversification timeline for the first several years of investing will involve REITs, precious metal funds, and some other stuff that seems a bit overkill. Yeah I'm almost done with pillar two and I'm just not doing all the poo poo he says would be "ideal." For one I just don't have those options in my 401k(and why not take advantage of a tax-sheltered account until I'm making enough money that I'm maxing both of them?) and for two who has the money when they're starting out to do that and meet minimum fund requirements? I guess I'd qualify as lazy by his definition of it. 
|
|
#
?
Jan 2, 2014 23:12
|
|
|
I'm long overdue to roll the SEP account from my previous employer over from Merril Lynch into a new retirement account with Vanguard. However, I'm a single filer whose AGI for 2013 will likely exceed the limit for partial contributions into a Roth as defined by the IRS and will almost surely exceed it next year. Do I have any other options besides a traditional IRA?
|
|
#
?
Jan 2, 2014 23:30
|
|
|
It's been a while since I read the four pillars, but earlier this week I picked up the intelligent asset allocator. I wanted to revisit my 401k allocation, and I was hoping it would be more in depth than the four pillars. I suppose it is, but when you get down to it the take-aways are the same: Understand the connection between risk and reward. Own a diversified portfolio of low cost index funds consistent with your tolerence for risk, complexity, and divergence from the major indexes. Don't try to time the market. I actually have pretty diverse options in my 401k, so I can fine tune my allocation in emerging markets, pacific rim stocks, REITs, etc. All else being equal, it would be a no brainer to diversify into them. However, those funds have expense ratios 0.50 to 1.00 % higher than the basic S&P 500 and large cap international index funds. The choice is not clear cut, and I wish Bernstein would have addressed the cost issue more specifically. He does say that small cap & emerging market funds have higher costs, but he doesn't give any specific guidance for determining the best trade off between diversification and increased cost. Ultimately I decided to invest in a highly diversified allocation, which pushed my average expense ratio up to 0.70%. It's not great but not terrible, and it feels like the right thing to do. My returns may not be higher, but I think my risk will be lower. The hardest part of re-allocating was putting a % down for gold. It felt like I was investing in bitcoins. Crabby Abby fucked around with this message at 00:17 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 00:13
|
|
|
One thing I couldn't reconcile from Four Pillars was: 1. Don't invest in things like art. This is the "Greater fool" theory where it only has value if you can sell it to someone for more than you paid for it. 2. BUY SOME GOLD, SONNY
|
|
#
?
Jan 3, 2014 00:18
|
|
|
GoGoGadgetChris posted:One thing I couldn't reconcile from Four Pillars was: Not that I'm a huge fan of gold, but it does have several advantages over antiques & art, assuming we're not talking about actually owning gold bars in your home: Liquidity, no need for additional insurance or special storage, no appraisal fees, and no danger of buying a forgery.
|
|
#
?
Jan 3, 2014 00:28
|
|
|
Noggin Monkey posted:I'm long overdue to roll the SEP account from my previous employer over from Merril Lynch into a new retirement account with Vanguard. However, I'm a single filer whose AGI for 2013 will likely exceed the limit for partial contributions into a Roth as defined by the IRS and will almost surely exceed it next year. Rollovers are not the same as contributions, and have different rules. This chart from the IRS tells you what can be rolled into what. http://www.irs.gov/pub/irs-tege/rollover_chart.pdf
|
|
#
?
Jan 3, 2014 00:46
|
|
|
Crabby Abby posted:It's been a while since I read the four pillars, but earlier this week I picked up the intelligent asset allocator. I wanted to revisit my 401k allocation, and I was hoping it would be more in depth than the four pillars. I suppose it is, but when you get down to it the take-aways are the same: Understand the connection between risk and reward. Own a diversified portfolio of low cost index funds consistent with your tolerence for risk, complexity, and divergence from the major indexes. Don't try to time the market. Those sound like pretty lovely funds. I get my funds through Fidelity, so maybe these numbers are even lower on Vanguard, but the Fidelity Emerging Market index Expense Ratio is 0.20-0.32% (depending on the amount you're investing, the smaller number requires $10,000 in the fund), and the Small Cap index Expense Ratios is 0.19-0.33%. Your situation sounds similar to mine (a 401k with a few index funds, and many more actively managed funds). What I do is use my 401k to invest in the few index funds available (SP500 and a general bond fund for mine), then use my Roth IRA to invest in the more exotic funds like a Small Cap index.
|
|
#
?
Jan 3, 2014 03:37
|
|
|
Employer benefits: -Allows up to 25% combined contributions for traditional 401k or Roth 401k -Matches first 6% of contributions -Charges 0.5% admin fee and fund fees varying between 0.07% and 0.61% -My current salary is between $50,000 and $80,000 Currently I'm investing 6% toward the traditional 401k. If I have a little bit more money to save, should I open a Roth Ira with TD Ameritrade (I already have a broker account with them otherwise I'd choose Vanguard) or just start contributing part of my salary toward the roth 401k? As I understand it, the tradeoff is convenience in exchange for more flexibility, lower expenses, and higher yearly limits. jromano fucked around with this message at 04:26 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 04:21
|
|
|
GoGoGadgetChris posted:One thing I couldn't reconcile from Four Pillars was: Well, unlike stocks or bonds, art doesn't really have it's own capacity for generating income, and thus returns. It's pretty much just speculation if the only reason you buy a piece of art is so that you can flip it for a profit down the line. If you like the art and garner your own value of it and it then happens to turn out to be worth 2000% more a couple years down the line, great. Just don't bet the farm on it. And when it comes to "masterpieces" and their overpriced ilk you can start tying connections to things like Apple and Facebook or whatever stock is hot this season.
|
|
#
?
Jan 3, 2014 05:34
|
|
|
I am reading 4 Pillars and he says (or I guess, predicted in early 2000s) that future US stock market returns will be lower than historical because the US stock market is now proven and has less risk. How has this turned out? The whole 4% rule thing is kinda predicated on future returns (over very long term) being similar to historical. Other question - I am getting out of my actively managed high MER financial advisor hell hole and moving everything into index funds or ETFs. Considering this will be most or all of my portfolio, should I dollar cost average it in over 3-12 months "just in case"? Or just buy in to my new portfolio 100% all at once? Vehementi fucked around with this message at 10:29 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 07:05
|
|
|
Crabby Abby posted:It's been a while since I read the four pillars, but earlier this week I picked up the intelligent asset allocator. I wanted to revisit my 401k allocation, and I was hoping it would be more in depth than the four pillars. I suppose it is, but when you get down to it the take-aways are the same: Understand the connection between risk and reward. Own a diversified portfolio of low cost index funds consistent with your tolerence for risk, complexity, and divergence from the major indexes. Don't try to time the market. One easy way to pick up all those little asset classes on the side for cheap is by buying them as ETFs in your Roth IRA. They also tend to have the most potential for growth, so the tax-free treatment is better for them anyways. I do this for emerging markets, since my 403b offers FSPSX as its international index which has developed markets only.
|
|
#
?
Jan 3, 2014 10:52
|
|
|
So I've had a ROTH IRA with Vanguard for a few years now, I'm wondering if there would be any legal issues with setting up a Traditional IRA for 2014. My plan would be to roll it into my ROTH eventually.
|
|
#
?
Jan 3, 2014 14:50
|
|
|
You can have as many IRAs as you like as long as you only contribute 5500 combined(you could do 3000 traditional and 2500 Roth for example). I'm assuming that if you open up the traditional with Vanguard as well under the same login, they'll keep track of them together in the little section telling you how much you can contribute when making a contribution. Why would you set up a traditional now to roll into your existing Roth later - are you at the upper end of a tax bracket for this year?
|
|
#
?
Jan 3, 2014 14:58
|
|
|
You can deduct a traditional IRA from your total income to get your MAGI which is used to determine your ACA subsidy if you don't have access to a 401k. My wife could leave her job this year so it's something I'm considering. Since I could contribute $11,000 between my wife and I that would help a ton if she does decide to leave. Apparently I could always roll the traditional into a ROTH if she decides to stay?
|
|
#
?
Jan 3, 2014 15:50
|
|
|
The correctness of the passive strategy relies on the assertion that it is impossible to perform research and choose good fund managers and/or funds. Since 50-90% fail, actively managed investing is doomed if research does not help - but I don't choose at random, so if research can help, then active funds may be viable. Can someone point me to the research that shows that I cannot research fund managers / funds to make good decisions?
|
|
#
?
Jan 3, 2014 21:25
|
|
|
Vehementi posted:The correctness of the passive strategy relies on the assertion that it is impossible to perform research and choose good fund managers and/or funds. Since 50-90% fail, actively managed investing is doomed if research does not help - but I don't choose at random, so if research can help, then active funds may be viable. Can someone point me to the research that shows that I cannot research fund managers / funds to make good decisions? I can't point you to that, but if you're going to put forth that much effort, why not just do research instead into the underlying stocks themselves and get an even greater return on investment for your time.
|
|
#
?
Jan 3, 2014 21:30
|
|
|
flowinprose posted:I can't point you to that, but if you're going to put forth that much effort, why not just do research instead into the underlying stocks themselves and get an even greater return on investment for your time. That is a super active full time thing. That's doing the fund managers' job for them, really, and I am not a trained professional. Further, everyone here says you can't pick stocks effectively! Which is it, people?! Vehementi fucked around with this message at 21:37 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 21:34
|
|
|
Vehementi posted:That is a super active full time thing. That's doing the fund managers' job for them, really. Further, everyone here says you can't pick stocks effectively! Which is it, people?! A statistically insignificant percentage of fund managers actually outperform the market for longer than 10 years. These are basically the Stephen Hawking of investing, and for some of them, perhaps they're just insanely lucky. Maybe you can identify them. Can you identify them before they have an amazing stellar track record? What happens when they retire 2 years into your investment? What if they were in fact insanely lucky and take huge risks with your money and eventually lose a massive amount? If you are an investor that can actually sit down with fund managers as a friend, with significant financial knowledge, understanding how their strategy works and just wanting to not have to do the work yourself, then you're really just a lazy Steven Hawking yourself. Do you think that's the case?
|
|
#
?
Jan 3, 2014 21:43
|
|
|
Vehementi posted:The correctness of the passive strategy relies on the assertion that it is impossible to perform research and choose good fund managers and/or funds. Since 50-90% fail, actively managed investing is doomed if research does not help - but I don't choose at random, so if research can help, then active funds may be viable. Can someone point me to the research that shows that I cannot research fund managers / funds to make good decisions? Have you finished pillar 1, 2, and 3 or are you still early in pillar 1? Read the sections on EMH and how many investors expect that they'll outperform the market. A paraphrase from early in pillar 3: "If the nation's biggest pension funds, each managing tens of billions of dollars, can't find effective money managers who pick the right funds(guys who, as Bernstein points out, are being paid tens of millions for their services to these funds), what makes you think you will be able to?" Nail Rat fucked around with this message at 21:54 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 21:47
|
|
|
As, always, the Four Pillars has the answer. Bernstein's chapter on active fund managers is excellent. Fund managers who beat the market in one year have a slight statistical likelihood of outperforming the market by a minute amount the following year. Beyond that, there is no statistically significant benefit to remaining with the same manager than picking a new one at random. The main take away from the chapter is that there are no talented stock pickers. There are, however, people who are naturally bad at it and can be relied on to underperform the market on a consistent basis.
|
|
#
?
Jan 3, 2014 21:50
|
|
|
GoGoGadgetChris posted:The main take away from the chapter is that there are no talented stock pickers. There are, however, people who are naturally bad at it and can be relied on to underperform the market on a consistent basis. That's a slight overgeneralization as he does say there are some talented stock pickers, but there are basically two who outperform(ed) the market consistently by a wide enough margin that it's worth the salary and expenses spent looking for the deal. It takes an awful lot of time and money to find out, as he points out, that a $40 stock is worth $50 only to have others jump on the train midway through you buying it all and kill your returns.
|
|
#
?
Jan 3, 2014 21:58
|
|
|
Vehementi posted:That is a super active full time thing. That's doing the fund managers' job for them, really, and I am not a trained professional. Further, everyone here says you can't pick stocks effectively! Which is it, people?! Maybe I was being too subtle. You're going to spend so much time looking for a "winning" fund manager that it will be near equivalent to picking stocks for the amount of "extra" return that you might gain if you can find one/some that are better than average. Which fund managers might be winning will change over time (just like which companies are the best to invest in at any time), which means you're going to have to keep doing this every so often to keep up. Picking a fund manager is probably not as "super active full time" as picking stocks, but the "extra" returns above market are also considerably lower compared to picking stocks. There's also the question as to how you logistically go about picking a fund manager. What metrics do you measure their performance/decisions by? How do you obtain all the information you need? I think you'll find it is a lot easier/cheaper to get loads of detailed information on stocks than it is on mutual fund performance. Even if you find a winning manager, what are the odds that his improvement over market returns are worth the extra fees you will pay for that fund? So here's me being a little less subtle: you can't pick a better fund manager any more than you can pick a better stock. Is it possible to do? Yes, it's possible. Would it take much more effort that would ever be worth it? Yes, probably so. It's also possible to pick stocks effectively, but it takes a lot of effort and research and familiarity with the industries you follow, and possibly even inside information (oh wait nobody has that do they?...)
|
|
#
?
Jan 3, 2014 22:05
|
|
|
Yeah, I am still reading through 4 Pillars. I'm also reading this http://www4.gsb.columbia.edu/null?&exclusive=filemgr.download&file_id=522 Basically, any argument that says "Most people are dumb / can't pick stocks / whatever" holds no water, because I do not intend to invest in dumb people if I can help it. Whether I can help it is the question. quote:There's also the question as to how you logistically go about picking a fund manager. Right. Even in these last 5 posts by you guys, I am seeing conflicting messages. On one hand you say it's not possible to pick stocks. On the other you say it is possible but just hard and requires time and research (if that's true, then why aren't people employing time and research to beat the market?). There are no good mutual fund advisors, else the huge pensions would scoop them up. But, there are Steven Hawkingses, they're just hard to identify, and you could be one too! Well, if it's possible and just hard, talking about how the extra gains might not be worth my time (?) is pretty weak. I feel like something is being left out here. These arguments don't feel sound. e: I'm mostly convinced, I'm just in extreme devil's advocate mode here. Vehementi fucked around with this message at 22:21 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 22:13
|
|
|
On the other side, I find your argument to be one of wishful thinking. You admit you can't do it full time, and all but two people in history who do it full time do not significantly outperform the market on a long timeline(more than a decade). Therefore your very best case scenario is to aim for a market-level return as it will be better than a market-level return or slightly-above-market-level return minus the high expenses involved in an active fund. Unless you literally luck out which can happen if you take all your life savings on one trip to Vegas too. Basically what you're doing is saying, I want to win the lottery, and calling us conflicting because we say you won't but some of us say well you might but probably not. Nail Rat fucked around with this message at 22:28 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 22:25
|
|
|
GoGoGadgetChris posted:As, always, the Four Pillars has the answer. Bernstein's chapter on active fund managers is excellent. Fund managers who beat the market in one year have a slight statistical likelihood of outperforming the market by a minute amount the following year. Beyond that, there is no statistically significant benefit to remaining with the same manager than picking a new one at random. Where is it said that fund managers who beat the market in one year have a slight statistical likelihood of outperforming the market the following year? I thought Bernstein said the opposite. Vehementi posted:I feel like something is being left out here. These arguments don't feel sound. You are seeing the way different people think. What is true is that there is little evidence which suggests that fund managers can systematically predict how stocks perform. Some people say that you have to be 'really smart' to do so, but I think this is just picking a flavor of the month. The 'statistically insignificant' amount of people who do well over a period of 10 years can be explained by probability. If you assume that with 55% probability that a person will beat the market any given year, then the probability that said person beats the market all 10 years is 'statistically insignificant'.
|
|
#
?
Jan 3, 2014 22:26
|
|
|
Vehementi posted:Yeah, I am still reading through 4 Pillars. I'm also reading this http://www4.gsb.columbia.edu/null?&exclusive=filemgr.download&file_id=522 I suggest that you read some of the work by William Sharpe. There is also a good paper by Steven Thorley written in the late 90's. The problem with the arguments in favor of passive investing is that it is often grounded in the Efficient Market Hypothesis, and those arguments start to sound nonsensical real fast. Arguments that claim you cannot pick stocks and beat the market is hard to swallow because it just is not true. Sharpe and Thorley promote passive investing with acknowledgment that the market is inefficient, or at least that it can, since the argument is solely based on cost and the zero sum nature of the market. In fact, this makes passive investing a more robust strategy, and the whole "you cannot pick stocks" argument just weakens the quality of the debate, in my opinion. Edit: also, read David Swensons Unconventional Success, since he is an avid active manager, but promotes passive investing for ordinary investors. He does not believe the markets are efficient, but he explains in a chapter late in the book on why active mutual funds still cannot outperform in general. The reasons he gives are very insightful and are based on practical issues moreso than skill or lack thereof. 80k fucked around with this message at 22:36 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 22:27
|
|
|
I think market efficiency is beside the point. The point is whether empirically some people can beat the market over time and whether it's possible to reliably identify those people. If the market were incredibly inefficient but everyone is a monkey, obviously funds would underperform regardless. There are many reasons you might or might not beat the market, and all we need to know is whether we can predict that (based on investment process, or stats, or whatever). Where da data at? "90% fail!" is not the da data. In that '80s Buffett article I linked below everything he influenced towards value investing beat the market over decades (not just 2 people, etc.) Is that a lead? e: I'm probably sounding obtuse now so I'm going to shut up and finish educating myself and revisit this later... Vehementi fucked around with this message at 22:44 on Jan 3, 2014 |
|
#
?
Jan 3, 2014 22:35
|
|
|
People have already said it above. Think of a fund manager as just another stock. Yes, you can probably sift through the data and trends and make some educated guesses towards clear winners. But like a stock this manager is a limited resource to the world and his/her performance and value doesn't exist inside a vacuum. Acquiring a market-beating fund manager (or even just bugging their home&office and mimicing their stock choices lock-step) is the rub, and is where simultaneously "you can" and "you can't" opinions can exist together. "Yes, you can". if there's a lot of questionable gaps in the soundness behind your reasoning, eg. an under-vetted candidate, you can still get lucky and beat the market. "No, you can't". If this candidate comes out as a likely winner to you, they are probably going to come out a likely winner to many others. Now their price goes up which obliterates the margin you had over the market with them (or become outright unaffordable). As well so many others will ape their behavior that it spoils their value. "Yes, you can". You come up with a secret winning formula to find a winning manager who is completely under the radar and as such you get in cheap and early to win at the long game before they get noticed by others. Congratulations, you got lucky and/or are the Leonardo da Vinci of fund manager selection, either way it's about as useful as the poker strategy of "try to flop quads". Bhaal fucked around with this message at 00:42 on Jan 4, 2014 |
|
#
?
Jan 4, 2014 00:40
|
|
|
Vehementi posted:The correctness of the passive strategy relies on the assertion that it is impossible to perform research and choose good fund managers and/or funds. Since 50-90% fail, actively managed investing is doomed if research does not help - but I don't choose at random, so if research can help, then active funds may be viable. Can someone point me to the research that shows that I cannot research fund managers / funds to make good decisions? If past returns and future returns (either through an active manager or a single stock) are completely uncorrelated then you are, in fact, picking at random.
|
|
#
?
Jan 4, 2014 00:56
|
|
|
Vehementi posted:Where da data at? I'd start here and here. Note that this research is hard to do yourself with current public data because institutions intentionally obscure the past results of their underperforming funds (how nice and honest of them). quote:Very few funds can consistently stay at the top. Out of 703 funds that were in the top quartile as of Eyes Only fucked around with this message at 01:01 on Jan 4, 2014 |
|
#
?
Jan 4, 2014 00:58
|
|
|
I love data about mid-caps. Don't they just become large caps if they do well and small cap if they flounder?
|
|
#
?
Jan 4, 2014 01:15
|
|
|
No fund manager wins consistently, they just make more winning calls than losing ones. And it's the big ones that matter that are often based on macro outlooks. We go to a certain gala every year and everyone buys in to a game that starts with everyone standing. Each person signals either heads or tails and then the game leader flips a coin, calls the outcome and the losers sit down. Eventually after around ten rounds you are left with one person standing. Is this person exceptionally good at the game or did they just get lucky? If you have a sufficiently large number of hedge fund managers with each making periodic large macro calls this is a very similar situation to the above game. It's not surprising at all when a couple pull off a winning streak. What's surprising is the amount of attention they're given and the applause for foreseeing macro events. What isn't surprising is that a large number of these clairvoyants often end up failing to predict the next big macro events while random managers with little previous attention manage to hit jackpot. There are successful traders out there but as expected there is a lot of churn. Rarely are the same winners observed over subsequent market cycles.
|
|
#
?
Jan 4, 2014 04:22
|
|
|
|
| # ? May 23, 2024 17:45 |
|
|
Vehementi posted:The correctness of the passive strategy relies on the assertion that it is impossible to perform research and choose good fund managers and/or funds. Since 50-90% fail, actively managed investing is doomed if research does not help - but I don't choose at random, so if research can help, then active funds may be viable. Can someone point me to the research that shows that I cannot research fund managers / funds to make good decisions? Here's a study by Morningstar where they find that low expense ratios are the single biggest indicator of future returns, even more so than their own "star" ratings. Basically you're pretty much always going to win out more with the low fees of passive management than any benefit active management might give you.
|
|
#
?
Jan 4, 2014 06:26
|
|