900k in cash, where would you invest

[Qs Laptop]

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Originally Posted by VanWinkle Only buy aggressive funds that go up, if they don't go up, don't buy them!!

If the market doesn't go up, don't buy index funds.

[freetodream]

Who sits with 900 k in cash?

[Mr._Graybeard]

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Originally Posted by SeanPizzle We are still about 6 years out on retiring (based on DD college schedule). I have about 900k in cash that I have been waiting to invest. I think the market will correct I'm both equities and housing in the next 18 months. Would you sit and wait for buying opportunities, get some CDs, or invest in hookers and blow?

Guns & ammo.

[Floridatennisplayer]

Buy a bunch Miami Vice suits, an old Ferrari, and Cruise the boardwalk

[OldShooter]

Quote:

Originally Posted by VanWinkle Only buy aggressive funds that go up, if they don't go up, don't buy them!!

Well, actually no. Over a year, about 1/3 of actively managed funds manage to beat their index benchmarks, regardless of whether the market is going up, down, or sideways. So even over such a short period the odds are 2:1 against their investors. Over that same year about 6% of them are closed or merged due to abysmal performance. Looking at five and ten years, over 90% of actively managed funds beat their benchmarks. Again, whether the market is going up, down, or sideways.

And the rest of the story is that past performance is not predictive, so there is no way to identify the tiny number of long term winners ahead of time. @Qs Laptop has no facts to contradict this because there are none.

This is settled science, although the financial industry desperately and constantly tries to keep the public from understanding these facts. The sad thing is that the hucksters are really quite successful at this.

The other amusing aspect is the naive idea that, if there was someone who could consistently and predictably win in the market, that he/she would be slaving away as a mutual fund manager, selling that expertise for a pittance. No chance.

[Qs Laptop]

Quote:

Originally Posted by OldShooter Looking at five and ten years, over 90% of actively managed funds beat their benchmarks. Again, whether the market is going up, down, or sideways.

And the OP's time frame is 6 years until retirement. Sounds like one would be a fool to settle for market returns when you have a 90% chance of outperforming the market.

Not only that but if there is a big correction, and money is deployed, it's virtually certain that you will seriously beat market returns for a couple of years with an aggressive growth fund. That margin of outperforming the market after a deep dive will be substantial. Since the OP's question was conditioned on what to do in a correction I think my advice was sound.

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And the rest of the story is that past performance is not predictive, so there is no way to identify the tiny number of long term winners ahead of time. @Qs Laptop has no facts to contradict this because there are none.

Well, with an index fund you know you will get market returns. You know there is NO CHANCE that you will outperform the market.

Also, fund managers and stock pickers do build a track record. Some are definitely skilled.

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The other amusing aspect is the naive idea that, if there was someone who could consistently and predictably win in the market, that he/she would be slaving away as a mutual fund manager, selling that expertise for a pittance. No chance.

Maybe they like having the resources and contacts available to them in their job. Who knows what they are doing on the side with their own money with this information.

[LRDave]

Hookers and blow (I keed, I keed,.... )

[OldShooter]

1) Sorry, you caught me with a typo. Over 90% of actively managed funds fail to beat their index benchmarks over five and ten year periods.

Re "virtually certain" please provide some statistical support for this statement. The people that publish the S&P SPIVA Report Cards will be fascinated to see that they have been wrong for all of the past 18 years of statistical reports.

2) Agreed, with an index fund there is no chance you will beat the market. But there is a near certainty that you will beat all but a tiny fraction of stock-picking funds. The long term odds are between 10:1 and 20:1 against your winning by investing in an actively managed fund.

Re "some are definitely skilled," again please provide some statistical evidence to support this statement. Doctors Fama and French will be very interested to see your evidence, as will the S&P researchers that publish the Manager Persistence report cards.

3) Are these winning managers a modern-day financial Mother Teresa? Do you really believe that they would not have all the resources and contacts they could possibly wish for if, in fact, they could do the impossible.

@Qs Laptop, you make many authoritative statements without a shred of supporting evidence. This despite the fact that most of them contradict over a half-century of research and statistical data. If you would like to read and understand the settled science in this area I would be happy to provide an extensive reading list, probably beginning with Michael Jensen's 1967 paper: https://papers.ssrn.com/sol3/papers....ract_id=244153 and Nobel-prize winner William Sharpe's analysis: https://web.stanford.edu/~wfsharpe/art/active/active.htm

[pb4uski]

Quote:

Originally Posted by OldShooter .... @Qs Laptop, you make many authoritative statements without a shred of supporting evidence. This despite the fact that most of them contradict over a half-century of research and statistical data. If you would like to read and understand the settled science in this area I would be happy to provide an extensive reading list, probably beginning with Michael Jensen's 1967 paper: https://papers.ssrn.com/sol3/papers....ract_id=244153 and Nobel-prize winner William Sharpe's analysis: https://web.stanford.edu/~wfsharpe/art/active/active.htm

Good luck with that OldShooter.... that would require reading.

[DrRoy]

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Generally, I would work on determining what a comfortable asset allocation is for my current situation and goals and them I would implement that strategy. I would probably take six months to a year to bring myself into my target asset allocation.

+1

[OldShooter]

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Originally Posted by pb4uski Good luck with that OldShooter.... that would require reading.

Sigh. You are right of course.

The problem is that there are a few posters here who authoritatively state complete nonsense, then when challenged for evidence to back up the statements they either fade into the woodwork or change the subject. They never provide the evidence because, of course, there is none.

It is arguably quixotic to challenge them but I think the statements, left alone, have a high probability of confusing people without a lot of investing expertise. That's the exact opposite of what I think this forum was set up to do.

[Qs Laptop]

Quote:

Originally Posted by OldShooter Sigh. You are right of course. The problem is that there are a few posters here who authoritatively state complete nonsense, then when challenged for evidence to back up the statements they either fade into the woodwork or change the subject. They never provide the evidence because, of course, there is none.

I could provide evidence, which you would dismiss because it is historical. For example, I could pick a starting date from the past for a $100,000 investment in any number of investment vehicles and compare it to an index fund. I could pick dates from the 1990's, or else 2004, 2005, 2006, 2008, 2010, 2012, etc., just about any date and show you that my picks beat the index. You would immediately dismiss it as being historical.

Then you would say that past performance is not predictive of future performance. This is true, of course. BUT, had these investments been done in these previous years at that time in the past, they would have beaten the market.

In essence, you are asking for proof and then you will not accept it as being valid. Nothing that I would show you will convince you. So, what's the point?

Meanwhile, it is an irrefutable fact that investors in an index fund will NEVER beat the market. It is also an irrefutable fact that some people do beat the market.

I'm also curious as to your constant pouncing on anyone that dares suggest that a managed fund is a viable alternative to an index fund. Why do you do this?

In the case of this thread, the OP asked for opinions. The OP is looking to do some bargain hunting after a correction. The OP is obviously not an index investor. I gave my opinion and I even said buying an index fund was a perfectly fine alternative.

You? You feel a need to condescendingly denigrate anyone that offers an alternative to your index investing philosophy.

[OldShooter]

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Originally Posted by Qs Laptop I could provide evidence, which you would dismiss because it is historical. For example, I could pick a starting date from the past for a $100,000 investment in any number of investment vehicles and compare it to an index fund. I could pick dates from the 1990's, or else 2004, 2005, 2006, 2008, 2010, 2012, etc., just about any date and show you that my picks beat the index. You would immediately dismiss it as being historical.

Anyone with an IQ above room temperature can pick equity fund winners by looking in the rear view mirror. There will always be winners. The problem is that there is no way to identify them at the beginning, when the investment decision is made.

Over ten years, about 5% +/- of actively managed funds will beat their benchmarks. About half of them (6% per year) will be closed or merged due to poor performance. The remainder will underperform compared to their benchmarks, sometimes dramatically. We have almost two decades of S&P SPIVA data that consistently shows this.

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Originally Posted by Qs Laptop Then you would say that past performance is not predictive of future performance. This is true, of course.

We agree. I'm glad to hear that you understand this. Years of S&P Manager Persistence data support this conclusion. But then why did you advise the OP to look at fund track records?

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Originally Posted by Qs Laptop In essence, you are asking for proof and then you will not accept it as being valid. Nothing that I would show you will convince you. So, what's the point?

Well, data mining history is only proof that you are smart enough to read old data. I've already conceded that there are always winners. That is not actionable information.

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Originally Posted by Qs Laptop Meanwhile, it is an irrefutable fact that investors in an index fund will NEVER beat the market. It is also an irrefutable fact that some people do beat the market.

Absolutely true. We agree. You don't mention, however, that the chances of a managed-fund investor beating the market over five or ten years is in the range of 1 out of 10 to one out of 20. Those are lousy odds.

The stock-pickers, however, desperately work to obfuscate the fact that the odds are lousy by cherry-picking the long time periods, comparing funds to irrelevant benchmarks, ignoring survivorship bias, and crowing about their funds' performance over a few months. No surprise, really. As the investing population begins to understand, the stock-pickers' income has dived, many of them have been laid off, and firms that rely on stock-picking funds are attempting to survive by merging. So the stock-pickers are scared for their livelihoods.

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Originally Posted by Qs Laptop I'm also curious as to your constant pouncing on anyone that dares suggest that a managed fund is a viable alternative to an index fund. Why do you do this?

Well, if "viable" means the investor in a managed fund is still alive at the end of ten years, then I guess that choice is viable. But if "viable" means an investor's probability of winning with managed funds is higher than with an index fund, then the choice is not viable.

I do this because people come here asking for investment information and too much of it is nonsense, like your assertion that managed funds are a good bet. They are not.

There I go, @pb4uski. Don Quixote charges yet again.

[davebarnes]

https://www.bloomberg.com/news/artic...g?srnd=premium
The Big Short’s Michael Burry Sees a Bubble in Passive Investing
"Now, Burry sees another contrarian opportunity emerging from what he calls the “bubble” in passive investment. As money pours into exchange-traded funds and other index-tracking products that skew toward big companies, Burry says smaller value stocks are being unduly neglected around the world."

[VanWinkle]

Quote:

Originally Posted by OldShooter Well, actually no. Over a year, about 1/3 of actively managed funds manage to beat their index benchmarks, regardless of whether the market is going up, down, or sideways. So even over such a short period the odds are 2:1 against their investors. Over that same year about 6% of them are closed or merged due to abysmal performance. Looking at five and ten years, over 90% of actively managed funds beat their benchmarks. Again, whether the market is going up, down, or sideways. And the rest of the story is that past performance is not predictive, so there is no way to identify the tiny number of long term winners ahead of time. @Qs Laptop has no facts to contradict this because there are none. This is settled science, although the financial industry desperately and constantly tries to keep the public from understanding these facts. The sad thing is that the hucksters are really quite successful at this. The other amusing aspect is the naive idea that, if there was someone who could consistently and predictably win in the market, that he/she would be slaving away as a mutual fund manager, selling that expertise for a pittance. No chance.

Did you miss my sarcasm? I think we are on the same page on Indexing for equity exposure.

[VanWinkle]

Quote:

Originally Posted by davebarnes https://www.bloomberg.com/news/artic...g?srnd=premium The Big Short’s Michael Burry Sees a Bubble in Passive Investing "Now, Burry sees another contrarian opportunity emerging from what he calls the “bubble” in passive investment. As money pours into exchange-traded funds and other index-tracking products that skew toward big companies, Burry says smaller value stocks are being unduly neglected around the world."

There are many Small Cap value index funds as well. Tilting can be done with active or passive funds. Pick your flavor!!

I have nothing against active funds for 10-20 percent of the portfolio.

[VanWinkle]

Quote:

Originally Posted by Qs Laptop If the market doesn't go up, don't buy index funds.

Agreed

[OldShooter]

Quote:

Originally Posted by davebarnes https://www.bloomberg.com/news/artic...g?srnd=premium The Big Short’s Michael Burry Sees a Bubble in Passive Investing "Now, Burry sees another contrarian opportunity emerging from what he calls the “bubble” in passive investment. As money pours into exchange-traded funds and other index-tracking products that skew toward big companies, Burry says smaller value stocks are being unduly neglected around the world."

A firm "maybe" on that. The money going into passive funds is for the most part money that was already in the market. So does rejiggering result in an overall different mix or is the mix about the same but rearranged among the portfolios? Same jar of beans, just some moved to be under different walnut shells. I don't think anyone knows.

Re bias towards bigger companies I think that is true, the reason being that too many investors equate "passive" investing with "S&P 500" index investing. Arguably its a close miss because the S&P is IIRC about 80% of the market cap. But certainly traders wouldn't be front-running index component changes if the changes didn't have an effect on the stock prices. Another case where no one knows what this information means.

Re personally, we invest only in total market funds so we do pick up the small company and value funds but only in their proportion to the market cap. There are people who argue for weightings other than market cap, the argument basically being the same -- that market cap weighting "underweights" the small and value stocks, but what does "underweight" mean? What should they weigh?

The next step above pure passive is to add factor-based portfolio "tilts." The Fama/French three factor capital asset pricing model indicates that small and value are factors that increase returns. Further, Fama argues that these factors are durable and will not be traded out of existence as people emphasize the factors. That doesn't make sense to me but he's the one with the Nobel. Dimensional Fund Advisors (https://www.dimensional.com/) offers an amazing smorgasbord of specialized funds suitable for building a tilted portfolio. We are actually playing with that idea right now; about 8% of our equity holdings are in DFA small and value both US and international. Maybe in five years we'll learn whether that was a good idea or not.

[Qs Laptop]

Quote:

Originally Posted by OldShooter Well, data mining history is only proof that you are smart enough to read old data. I've already conceded that there are always winners. That is not actionable information.

I'm not "data mining". I've got several funds that I like and have been invested in. I'm not suggesting any random managed fund, which is what your analysis uses.

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Absolutely true. We agree. You don't mention, however, that the chances of a managed-fund investor beating the market over five or ten years is in the range of 1 out of 10 to one out of 20. Those are lousy odds.

Well I suppose the funds that I like comprise less than 5% of the large-cap funds that are available, but again, I'm not comparing the index performance to just any old managed fund, which is what you are doing.

You seem to be saying that NEVER beating the market is supposed to be good odds?

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The stock-pickers, however, desperately work to obfuscate the fact that the odds are lousy by cherry-picking the long time periods,

I'm not cherry picking the time periods. I'm suggesting just about any time frame (of a couple of years duration) in the past 30 years. Or I suppose since 1992, since that was the year Vanguard Total Stock Market fund started.

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comparing funds to irrelevant benchmarks,

I'm comparing large-cap growth funds to either a total stock market index or the S&P 500 index.

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and crowing about their funds' performance over a few months.

I'm talking about picking any 3 year, 4 year, 5 year, or any 6 through 30 year period and looking at the data.

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Well, if "viable" means the investor in a managed fund is still alive at the end of ten years, then I guess that choice is viable. But if "viable" means an investor's probability of winning with managed funds is higher than with an index fund, then the choice is not viable.

Again, not ANY managed fund, but certain, particular funds.

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I do this because people come here asking for investment information and too much of it is nonsense, like your assertion that managed funds are a good bet. They are not.

Again, not ANY managed fund, but certain funds.

[OldShooter]

OK, I'll bite: How does one identify (ahead of time) these "certain particular funds" that will win? Remember we have agreed that past performance is not predictive.

Re not being "random" choices, did you look at this video? Maybe you have something to teach Doctors French and Fama? https://famafrench.dimensional.com/v...-managers.aspx They have failed to do what you apparently know how to do. Maybe you can get a Nobel too.

Just for grins, here is a graphic I have posted before:

This is data is from one of the S&P Manager Persistence reports. All of them basically say the same thing though the percentages have a little jitter from report to report.