Yale's top investor belongs on ER Forums

[Meadbh]

http://www.nytimes.com/2008/02/17/business/17swensen.html?_r=1&oref=slogin

 

[CybrMike]

seems kind of silly though.

"I can beat the market with all my fancy stock and manager picking, but no one else can so they should just invest in index funds."

 

[W2R]

http://www.nytimes.com/2008/02/17/business/17swensen.html?_r=1&oref=slogin

That was encouraging! Thanks, Meadebh.

 

[W2R]

seems kind of silly though.

"I can beat the market with all my fancy stock and manager picking, but no one else can so they should just invest in index funds."

I thought he was implying, "Nobody can beat indexing, but I'm not going to SAY that point blank since people who make their money in this industry would take offense".

 

[Meadbh]

I interpreted his discussion as caution on the risks, fees and taxes associated with alternative investments such as hedge funds, except for the megarich. For Mr or Ms Average, he is clearly in favour of indexing.

 

[unclemick]

seems kind of silly though.

"I can beat the market with all my fancy stock and manager picking, but no one else can so they should just invest in index funds."

Now now - remember Clint Eastwood - "A man's got to know his limitations."

So how many posting here live/breathe it 24/7 and have it as their day job and are given many millions of other people's money and thus can assemble/gain access to the skill sets required to pull it off.

Given male hormones - you know you're gonna try. Look how many golf.

Index funds maybe the horse I rode in on - doesn't mean I haven't been putzing for forty years(not golf) - but no book, nor do I book speaking engagements or give interviews.

heh heh heh - we do have a few financial types who post here. As for me - Tiger Woods and Warren Buffett can breath easy. .

 

[saluki9]

seems kind of silly though.

"I can beat the market with all my fancy stock and manager picking, but no one else can so they should just invest in index funds."

If you compare his resources to those of the average professional investor let alone individual it doesn't seem silly at all.

 

[bigla]

I listened to Bob Brinker in Jan. 2000 and got out of the market, sving my portfolio from a severe beating. I listened to him again in Mar. 2003 when he said get back in and we had a great run until recently. He still remains fully invested and I am more likely to stay the course with my diversified portfolio than not. But like Unclemick says, sometimes "hormones" a/o emotions lead us to make decisions.
Larry

 

[mathjak107]

I thought he was implying, "Nobody can beat indexing, but I'm not going to SAY that point blank since people who make their money in this industry would take offense".

correction: no one can beat indexing in an up market

 

[myself]

I found it rather interesting that he criticized Jim Cramer who is basically suggesting that people can achieve the same levels that fund managers do.
Imagine, finding FSLR at $74, and waiting for a few weeks to get out at $214. Yeah, I guess I'm a fool.
Not to say that getting some GOOG and selling it at a small loss ($800) didn't hurt a little. So, yes I'm not perfect (much like the mutual fund managers).
I guess I'll have to see what happens over this year.

 

[saluki9]

I found it rather interesting that he criticized Jim Cramer who is basically suggesting that people can achieve the same levels that fund managers do.
Imagine, finding FSLR at $74, and waiting for a few weeks to get out at $214. Yeah, I guess I'm a fool.
Not to say that getting some GOOG and selling it at a small loss ($800) didn't hurt a little. So, yes I'm not perfect (much like the mutual fund managers).
I guess I'll have to see what happens over this year.

Do it for 20 or so years and then come back to me.

 

[saluki9]

correction: no one can beat indexing in an up market

Now all you need to do it tell me where the market is heading.

That should be easy!

 

[FinanceDude]

correction: no one can beat indexing in an up market

Gotta agree 100% with that..........

 

[FinanceDude]

I thought he was implying, "Nobody can beat indexing, but I'm not going to SAY that point blank since people who make their money in this industry would take offense".

That's not what he was saying..........he's saying he has tools that most of us can only dream about, and unheard access to fund managers and equity analysts.

I doubt he cares about the general financial advising industry........

 

[myself]

Do it for 20 or so years and then come back to me.

In 20 years or so, I'll be in retirement (although I probably won't declare retirement until 67.

Besides, I believe that fund managers effectively direct the markets, since they have such large funds to redirect at a whims notice.

 

[myself]

Now all you need to do it tell me where the market is heading.

That should be easy!

If you want a guestimate (much like anyone else can give), I'd say the market is heading lower. It'll probably bottom out when the DJIA hits about $11,500, but that won't be until just before the next Fed meeting.

 

[Running_Man]

He says it is fruitless for individual investors to pick stocks. “There is no way that an individual can go out there and compete with all these highly qualified and compensated professionals,” Mr. Swensen said.

This is where I disagree with individuals such as Mr. Swenson. Some such as Bernstein are going further, suggesting the government should ban Wall Street investing in retirement accounts and only allow indexing as it is an impossibility to beat the market as an individual.

The common refrain from the doubters is as Suluki9's who state "show me how you beat it after 20 years" Could someone please show me what Bernstein or Swenson were suggesting 20 years ago? Has anyone followed the same indexing strategy for 20 years? I know that back through 1995-1998 the prevalant suggestion from indexers was that a mixture of bonds and S&P500 would outperform any managed fund due to their international exposure and growth potential. Now 10 years later we are at an annual rate of about 5 percent return for the S&P500, different mixes are showing up.

The ability to be able to select stocks without having to justify it to an investor allows for returns to be earned by those with the patience and discipline to do so with very good dividends in my opinion. With the internet and the ability to look up SEC filings and listen to the management on conference calls live as they get the same answers to questions from the Wall Street "professionals" has made the modern era even more profitable to the individual investor.


Probably the best thing I think Bernstein has written in his 4 books and thousands of words in his blogs, postings and writings is not to listen to anyone else's opinion but your own, of course Bernsteing would prefer you decide this after you pay to hear what he has to say, by ordering some of his writings online at Amazon.com.

 

[DblDoc]

Now all you need to do it tell me where the market is heading.

That should be easy!

In 20 years it will be up.

DD

 

[FinanceDude]

The common refrain from the doubters is as Suluki9's who state "show me how you beat it after 20 years" Could someone please show me what Bernstein or Swenson were suggesting 20 years ago? Has anyone followed the same indexing strategy for 20 years? I know that back through 1995-1998 the prevalant suggestion from indexers was that a mixture of bonds and S&P500 would outperform any managed fund due to their international exposure and growth potential. Now 10 years later we are at an annual rate of about 5 percent return for the S&P500, different mixes are showing up.

5% for 10 years is NOT a good investment return, you could have made that in CD's or Treasuries........where's the reward for the risk? Maybe with reinvested dividends,you're up to 5.8%.......still not a good return............

 

[Running_Man]

5% for 10 years is NOT a good investment return, you could have made that in CD's or Treasuries........where's the reward for the risk? Maybe with reinvested dividends,you're up to 5.8%.......still not a good return............

My point is that is what indexers were pointing out in 96-97 as a VERY GOOD investment. This is not my return over that period.

 

[FinanceDude]

My point is that is what indexers were pointing out in 96-97 as a VERY GOOD investment. This is not my return over that period.

I assumed that......... I suppose there are some folks who have been in the S&P 500 stock fund for 10 years or more, and are happy with an average return of less than 6%, blaming the tech wreck and 9/11 for the low return.

 

[saluki9]

This is where I disagree with individuals such as Mr. Swenson. Some such as Bernstein are going further, suggesting the government should ban Wall Street investing in retirement accounts and only allow indexing as it is an impossibility to beat the market as an individual.

The common refrain from the doubters is as Suluki9's who state "show me how you beat it after 20 years" Could someone please show me what Bernstein or Swenson were suggesting 20 years ago? Has anyone followed the same indexing strategy for 20 years? I know that back through 1995-1998 the prevalant suggestion from indexers was that a mixture of bonds and S&P500 would outperform any managed fund due to their international exposure and growth potential. Now 10 years later we are at an annual rate of about 5 percent return for the S&P500, different mixes are showing up.

The ability to be able to select stocks without having to justify it to an investor allows for returns to be earned by those with the patience and discipline to do so with very good dividends in my opinion. With the internet and the ability to look up SEC filings and listen to the management on conference calls live as they get the same answers to questions from the Wall Street "professionals" has made the modern era even more profitable to the individual investor.

1. Sinquefeld, Bogle, etc have been advocating indexing since the bear market of the early 1970s. What you have to realize is that at the time they were advocating people use the tools that were available at the time. It is only very recently that it was possible to index international, EM, etc.

2. If you believe that more people chasing the same opportunity set creates more opportunity I guess there isn't much else to say.

 

[Delawaredave5]

I think Swensen's allocations are quite different than his recommendations to us "common" folks.

Swensen has large portions in natural resources and private equity. His US stock portion is 20% or less. I'm suprised his recommendations aren't higher tilted towards international.

Here's intersting article on allocations for various ivy league endowment funds.

Learning From The Harvard & Yale Endowments - Seeking Alpha

 

[Running_Man]

1. Sinquefeld, Bogle, etc have been advocating indexing since the bear market of the early 1970s. What you have to realize is that at the time they were advocating people use the tools that were available at the time. It is only very recently that it was possible to index international, EM, etc.

2. If you believe that more people chasing the same opportunity set creates more opportunity I guess there isn't much else to say.

First let me state I think passive investing is very important for investors who do not like to think about financial matters, it is very much better than any alternative. I am opposed to the claims these index creators make that one cannot beat "market returns" which is an everchanging definition in it's own right, over the long run, when they themselves have no long run to provide a comparison of and continue to "fine-tune" their investment strategy.

Rex Sinquefield created the first S&P500 fund and has made himself very rich selling passive investment vehicles. The very success Bogle and Sinquefield had in creating the S&P500 index class resulted in my opinion in virtually eliminating the risk premium of the asset class, which was directly observable in the S&P500 dividend yield and the underperformance of that index for a decade. Yet Sinquefield argues that the S&P500 risk premium is a constant. I believe the success of index funds changes the risk premium and directly results in a lower return the greater the success in obtaining funds for a given index.

To become rich selling a product that by it's very description is the best return you possibly can earn and any losses are unavoidable or even better an opportunity for making even more money (send it in!) is a very admirable feat. I am sure he has been very happy with his investment in his investment company.

 

[FinanceDude]

First let me state I think passive investing is very important for investors who do not like to think about financial matters, it is very much better than any alternative. I am opposed to the claims these index creators make that one cannot beat "market returns" which is an everchanging definition in it's own right, over the long run, when they themselves have no long run to provide a comparison of and continue to "fine-tune" their investment strategy.

The alternative is avoiding market risk entirely and having inflation eat you alive...........a huge financial mistake many make, more than even most can imagine..........

Rex Sinquefield created the first S&P500 fund and has made himself very rich selling passive investment vehicles. The very success Bogle and Sinquefield had in creating the S&P500 index class resulted in my opinion in virtually eliminating the risk premium of the asset class, which was directly observable in the S&P500 dividend yield and the underperformance of that index for a decade. Yet Sinquefield argues that the S&P500 risk premium is a constant. I believe the success of index funds changes the risk premium and directly results in a lower return the greater the success in obtaining funds for a given index.

Good point. I think a well diversified portfolio cane asily beat the S&P 500 over long periods of time, and has.

To become rich selling a product that by it's very description is the best return you possibly can earn and any losses are unavoidable or even better an opportunity for making even more money (send it in!) is a very admirable feat. I am sure he has been very happy with his investment in his investment company.

True. As for me, unless I am in an international fund, I avoid betas of 1.00.........something a market index fund can not do. Ever notice in good markets, how all the "gurus" are pushing index funds, but in bad markets they say little or nothing?