so what is the point of stock picking? just buy index and relax
80% of funds underperform the market?
- Thread starter gainpower777
- Start date
It's an oft cited statistic.
But every single time I see that statistic mentioned, or someone shows a graph, then never filter it through the lens of risk.
I respect and like the Financial Times - FT. But they had a video on that, Auethers Note, and I said the same thing there.
If you filter it through the lens of risk, any competent money manager absolutely DESTROYS the market. SPY has what? A sharp of under 0.95 this year? I'm only 400 BPS above it at the moment, but with a Sharpe Ratio of 3.11 on a Weekly measurement? I am ripping the market to shreds. I'm somewhat unique, but not all that much if you're talking competent money managers.
Seriously, you give me a guy with that can kick out 4% to 6% per year, with a sharpe of 3, and occassionaly, he hits a 20%, in other words, he has a beautiful Sortino? Minimum DD's? I'll take that guy hands down every single time to ... heck ... trade my own money that's AUM. As will anyone else that's deciding to put money AUM if they have a brain in their head.
Heard another professional I talk with put it beautifully ...
There are those who already have wealth.
Their concerns are:
1) Not to lose a dime & Beat Inflation
2) Safely Beat The Returns of Deposits & U.S. Treasuries
[FONT=arial, sans-serif]3) Talk to me what can you do?
[/FONT]
So if someone is just "going long an index"? I mean ... what's the risk? We head into another bear market? Ok, yeah, in SIX YEARS, we might recover it, and then head higher still.
That don't cut it in the world of managed money.
But every single time I see that statistic mentioned, or someone shows a graph, then never filter it through the lens of risk.
I respect and like the Financial Times - FT. But they had a video on that, Auethers Note, and I said the same thing there.
If you filter it through the lens of risk, any competent money manager absolutely DESTROYS the market. SPY has what? A sharp of under 0.95 this year? I'm only 400 BPS above it at the moment, but with a Sharpe Ratio of 3.11 on a Weekly measurement? I am ripping the market to shreds. I'm somewhat unique, but not all that much if you're talking competent money managers.
Seriously, you give me a guy with that can kick out 4% to 6% per year, with a sharpe of 3, and occassionaly, he hits a 20%, in other words, he has a beautiful Sortino? Minimum DD's? I'll take that guy hands down every single time to ... heck ... trade my own money that's AUM. As will anyone else that's deciding to put money AUM if they have a brain in their head.
Heard another professional I talk with put it beautifully ...
There are those who already have wealth.
Their concerns are:
1) Not to lose a dime & Beat Inflation
2) Safely Beat The Returns of Deposits & U.S. Treasuries
[FONT=arial, sans-serif]3) Talk to me what can you do?
[/FONT]
So if someone is just "going long an index"? I mean ... what's the risk? We head into another bear market? Ok, yeah, in SIX YEARS, we might recover it, and then head higher still.
That don't cut it in the world of managed money.
Let's put it this way ...
So you have the SPY in the following image, and you also have a portfolio.
SPY during this time period, returned 58% (sounds pretty nice eh?) ... BUT, you had to withstand 22.8% volatility.
In hindsight, everyone can say they will hold out for the 58%. Problem being, in March of 2009, no one was talking about the S&P being here where it is today, and if they were? Did they have the convinction to put their money to work?
The volatility messes with your head.
I can only think of one guy at a firm out in New York, that said he was going long then. Guy is just freaking brilliant. I certainly wasn't going long. Heck, I didn't get long until July of 2009, and I thought everything before that was just a relief rally.
Point being ... volatility messes with your head.
But the other portfolio? You didn't get your 55%. You got 49.6% return. The market is currently beating it for this particular periodicity. But the volatility was only 6.2%.
You give me that portfolio 49.% portfolio each and every time. The guy that's managing it also would be allowed to manage some of my money, because I don't want my money lost and volatility messing with my head and his.
Of course, all I heard in 2013?
The markets beating you! The markets beating you! The markets beating you!
Yeah, well, ok ... the market is beating me for that periodicity.
Big whoop.
I'll take the sharpe of 0.51 over 0.27 for eight years worth of performance, any day of the week, and could care less what the market is doing.
So you have the SPY in the following image, and you also have a portfolio.
SPY during this time period, returned 58% (sounds pretty nice eh?) ... BUT, you had to withstand 22.8% volatility.
In hindsight, everyone can say they will hold out for the 58%. Problem being, in March of 2009, no one was talking about the S&P being here where it is today, and if they were? Did they have the convinction to put their money to work?
The volatility messes with your head.
I can only think of one guy at a firm out in New York, that said he was going long then. Guy is just freaking brilliant. I certainly wasn't going long. Heck, I didn't get long until July of 2009, and I thought everything before that was just a relief rally.
Point being ... volatility messes with your head.
But the other portfolio? You didn't get your 55%. You got 49.6% return. The market is currently beating it for this particular periodicity. But the volatility was only 6.2%.
You give me that portfolio 49.% portfolio each and every time. The guy that's managing it also would be allowed to manage some of my money, because I don't want my money lost and volatility messing with my head and his.
Of course, all I heard in 2013?
The markets beating you! The markets beating you! The markets beating you!
Yeah, well, ok ... the market is beating me for that periodicity.
Big whoop.
I'll take the sharpe of 0.51 over 0.27 for eight years worth of performance, any day of the week, and could care less what the market is doing.
best kept secret.. in a 20 yr period 90% of mutual funds cannot beat SPY
buy VOO vanguard .. .0.07 % .. SPY is 0.09%...
.07. is for 100K..in VOO.. only 70 Dollars.. avg mutual fund is .5 to 2%. actively managed..
my #@!$#@$%.. go figure... buy VOO and go to sleep..
my freind works for Morningstar.. he and I argued for an hour and convinced me...
dont mess with texas. .sorrry.. SPY... u just cant beat it.. buddy...
they keep re indexing. and take out the bad fish and replace with good ones. ha ha
buy VOO vanguard .. .0.07 % .. SPY is 0.09%...
.07. is for 100K..in VOO.. only 70 Dollars.. avg mutual fund is .5 to 2%. actively managed..
my #@!$#@$%.. go figure... buy VOO and go to sleep..
my freind works for Morningstar.. he and I argued for an hour and convinced me...
dont mess with texas. .sorrry.. SPY... u just cant beat it.. buddy...
they keep re indexing. and take out the bad fish and replace with good ones. ha ha
YES. The bigger the AUM, the better. Anybody with a modicum of financial savvy knows that index funds consistently beats actively managed funds. It's been proven for at least 20 years now since academic research first came out.
