Wall Street's Biggest Lie Finally EXPOSED

[Pa(b)st Prime]

Quote from Brandonf:

How about a 30 year time horizan for you? If you had bought the S&P500 at the peak in 1964 it was an inflation adjusted 3100, by 1982 it had fallen to around 800, and it wasnt until the mid 90's that you got back to breakeven. That's a pretty LONG TERM time horizan to be losing money over.

Brandon I love ya but what's the point? Ok, stocks haven't out performed inflation. By the same coin they haven't as a class underperformed either.

How good would buying $700 gold and $30 Crude back in 1980 look? Or buying a basket of Detroit homes? OTOH if a guy bought a basket of tech stocks or a home in Beverly Hills he'd be a happy camper.

By statistical law the number of shares that out perform using a market timing technique will equal exactly the number that under perform. Zero sum. So while you and me may believe we out perform-and obviously we have because we took a few thousand to a million-but the average timer will have just average results. Just like if we took the DNA of Bill Belichick and made every coach in the NFL a Belichick clone. At the end of the year what would the combined winning percentage of our Belichick clones be? Exactly .500, eh? The number of games won in a season MUST equal the number of games lost.

So while I personally don't subscribe to portfolio theory I'm less than harsh at those who do because EOD it all winds up close to the same baseline.

 

[Brandonf]

Quote from Pa(b)st Prime:

Brandon I love ya but what's the point? Ok, stocks haven't out performed inflation. By the same coin they haven't as a class underperformed either.

How good would buying $700 gold and $30 Crude back in 1980 look? Or buying a basket of Detroit homes? OTOH if a guy bought a basket of tech stocks or a home in Beverly Hills he'd be a happy camper.

I guess I should have tried to be more clear with the point. First of all I'm not saying you shouldnt be in the stock market, and I'm not saying you should not invest either. Far from it. But, I do think that the "buy an index fund" type of lazy investing that everyone seems to have fallen for is not going to work out for anyone.
So I suppose the point I should have made at the end of it was that rather then just buying and holding a basket of stocks, you aught to look for the traits of good companies and good stocks that will continue to outperform, so that you end up in the BRK's and not just in the S*P500 which will not do much for you.
Thanks for giving me the opportunity to clear up the point, since like I said before I'd not done a very good job with it. I think that at the end it came out like I was saying "stay the hell out of the stock market", which is not the case at all.
Brandon

 

[volente_00]

Quote from Brandonf:

How about a 30 year time horizan for you? If you had bought the S&P500 at the peak in 1964 it was an inflation adjusted 3100, by 1982 it had fallen to around 800, and it wasnt until the mid 90's that you got back to breakeven. That's a pretty LONG TERM time horizan to be losing money over.

That's a pretty big what if.


To me the best strategy is incremental buying of spy over a greater than 10 year period in order to dollar cost average. To get an even greater return, you can modify it to where you only add to the total position on dips and not in periods where it is overbought. In the end buying low and selling high will always prevail. To make this strategy profitable you should be looking for a 20 year window. What amazes me is the amount of retired people who got killed in the market downturn. I know a few of them and I can't believe their so called advisors had them so heavily weighted in equities with them being on a fixed income.

 

[Sniemiec]

Buy and hold the indexes doesn't seem to work over the long haul, but individual stocks can outperform the indexes when bought and held.

Of course, you need to have an exit strategy too.

 

[Clubber Lang]

Quote from Covertibility:

Also the Great Depression really wasn't that bad for investors.

Are you related to stock_trad3r?

 

[Clubber Lang]

Quote from FookYu:

Seems to me that buy and hold does work, otherwise geniuses like Warren Buffett would not exist

Survivorship bias.

Of course there will always be one or two people who destroy the curve.

Everyone thought Bill Miller was a genius too, until 2008. Over the last dozen years he's made nothing for his investors while raking in hundreds of millions for himself and his firm.

Mutual funds are a scam. Plain and simple.

 

[pathus21]

Quote from Brandonf:

I guess I should have tried to be more clear with the point. First of all I'm not saying you shouldnt be in the stock market, and I'm not saying you should not invest either. Far from it. But, I do think that the "buy an index fund" type of lazy investing that everyone seems to have fallen for is not going to work out for anyone.
So I suppose the point I should have made at the end of it was that rather then just buying and holding a basket of stocks, you aught to look for the traits of good companies and good stocks that will continue to outperform, so that you end up in the BRK's and not just in the S*P500 which will not do much for you.
Thanks for giving me the opportunity to clear up the point, since like I said before I'd not done a very good job with it. I think that at the end it came out like I was saying "stay the hell out of the stock market", which is not the case at all.
Brandon

Now you are getting into territory where you bring up the argument of whether or not the market can be beat. Now you are encouraging people to go out and invest actively and they will probably under perform the market in the vast majority of cases.