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Thinks s/he gets paid by the post
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Great! Welcome aboard. The prize contest is bragging rights .
Is there a dedicated thread to this contest?
Great! Welcome aboard. The prize contest is bragging rights .
For example, in 2017 Morningstar's Active/Passive Barometer shows that 46% of active funds beat passive funds; in 2018 the number was 38%. While not a majority, that's a far cry from the paltry 5% advantage you are claiming over 50 years.
Is there a dedicated thread to this contest?
Right, but you know how this line of reasoning always goes: "Sure, that's true for nitwit investors who don't know how to move to the funds that will win next year. I can reliably spot the winners, and I invest in those. You just have to do a lot of research, be really smart, and be gutsy."Do the math out for 5 or 10 years and you see that very few will be ahead at that time.
You can do what you want with your money. I'll take the passive approach, and be happy with market avg returns.
Yup, it's linked earlier in this thread. Or you can search for "Beat Boho 3.0" and that should find it.
Do you really believe monkeys know the difference between heads and tails on a coin?
You are invited to show us how you happily go on beating the market over the next couple of years.
http://www.early-retirement.org/forums/f44/stocking-picking-contest-v3-0-a-97638.html
No need to show us past data or anything, just simply see how well you stack up against a total stock market index fund and others in the contest.
I think you should start a separate thread since this thread is all about the Three Fund Portfolio.
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Here is a better analogy. There are some baseball players that can hit a lot of home runs. There are some that cannot. When an MLB team goes to draft day and is looking to pick the best players, do they consider spending their time, effort, and money to pick an average player? Because over time it will simply average out that we will win the World Series... .
Over virtually any significant period, it is easy to beat the average investor >or< the average actively managed fund--just buy the market and pay as little as possible in fees.Hey, if someone can show me a way to reliably do better than average, I'm all ears. I'd love to do better than average.
And here is where I think that analogy falls apart...
Sure, we can find a player/stock that has above average history, easy, just check the stats. Agreed?
OK, now what? Certainly, the 'market price' for that above average player/stock will be... above average. So now the question becomes, will their future performance continue to be enough above average to justify the above average price we paid?
Wait, what was that word I underlined? "Future"? Seems like we need a crystal ball, and lacking that, I know of no skill set that allows one to predict the future.
And that is why the stats show what they show - that there is a low chance of beating the average.
Hey, if someone can show me a way to reliably do better than average, I'm all ears. I'd love to do better than average. But if it isn't definable so that it can be tested to be repeatable, it isn't really of any value to others.
-ERD50
...or even a 24% chance over the past 10 years to be low, sure, give up and accept average returns. ....
Over virtually any significant period, it is easy to beat the average investor >or< the average actively managed fund--just buy the market and pay as little as possible in fees.
Now, if we want to beat the market, that's more demanding.
What is the market? If I did decide to beat it. With 3.7 unique index passive funds I am unsure which one to beat
Predicting the future is not possible. But there is throwing ones hands in the air and saying, "no point in trying to beat the market, can't be done, just buy the index" and also the fact that some people DO beat the market. It's all about which group of people you want to be in. Give in and be average because there's no point in trying or try to be better than average...........
.... Note that I do think there are categories (FI, SC, RE) where active can outperform passive (and the M* data bears this out)...
Precisely.One more angle to consider.
If one does beat the "market" 24% of the time, by how much % does one beat the average returns, vs. the 76% one is below the "market", by how much % is one below the average returns?
My feeling is that I don't want to spend all my time researching and evaluating, so the simple index funds do better than I would probably do based on minimal time investment. The three fund portfolio works well for almost all.
+1 There is room for active managed funds in more narrow parts of the investing universe... I recently bought some Wellesley to get the benefit of their expertise in FI.... but for the vast majority of my AA index funds are better.
This is why the casinos and lotteries will never go out of business. Some claim that the people who play these games are simply innumerate, but I think it is more basic: Evolution has bred us to think we are exceptional and to be optimistic. Innumeracy helps, though....
Well, if you consider a 46% chance in 2017 to be low or 38% in 2018, or even a 24% chance over the past 10 years to be low, sure, give up and accept average returns. I don't consider a 46% chance to be low. ...
Predicting the future is not possible. But there is throwing ones hands in the air and saying, "no point in trying to beat the market, can't be done, just buy the index" and also the fact that some people DO beat the market. It's all about which group of people you want to be in. Give in and be average because there's no point in trying or try to be better than average. ....
.... Well, if you consider a 46% chance in 2017 to be low or 38% in 2018, or even a 24% chance over the past 10 years to be low, sure, give up and accept average returns. I don't consider a 46% chance to be low. ....
.... Of course it's definable. With equities you need to beat Vanguard's total stock market index. Or with US stocks beat Vanguard's S&P500 index. For fixed income investments you must beat the total bond index.
My stock pickin' dude has been beating the market (S&P500) for 4 years straight now including his 1% fee. With serious qualified dividends at low tax rates.
What is the market? If I did decide to beat it. With 3.7 unique index passive funds I am unsure which one to beat
... I (foolishly, IMHO) invested pretty heavily in some Oakmark funds (OAKMX and OAKIX) 10+ years ago because of what at the time was market beating returns and a lot of fawning press coverage, including from M* who still to this day rates them both as "Gold" funds. Now, these are two of the absolute worst funds I own - OAKIX is down 15.83% over the past year, 9.5% below the MSCI ACWI Ex-US bogie and 8.78% below it's category average. ...
Best of luck..
... Many of those advocating passive investment on this forum are sophisticated long term investors. In many cases they are risk takers and excel in their chosen field and they excel at investing. Yet, they came to the conclusion that this approach provides the best returns. Not average or sub par returns. They are not settling. They are taking the path that is likely to lead to success. And they are avoiding sub optimal results which tend to be the norm. ....