Why is it so hard to beat the market?
- Thread starter stocktrader3429
- Start date
I'm not saying, nor pretending, that I'm a genious when it comes to investments. I would probably need a decade of 30 percent+ return to prove to myself and others that it's not sheer luck.
Also, rolling a dice vs. stocks is nothing. Rolling a dice means nothing. You can roll it for 10 years and you still can't be called an expert. So enough with the dice vs. stocks comparison.
Also, I'm not saying I'm somehow better than the pro money managers because I'm not. However, yes I credit myself to playing patient and limiting it to 15 positions. And give it to the managers who play the trading game.
Also, I don't compare myself to money managers. They are traders, they trade daily. I'm not a trader, I'm an investor. Some of you are confusing it. If I trade 5000 times a year vs. 15, then I need to be much more qualified. Duh!
Now back to the real topic: why do money managers need to trade 5000 times vs. 500 or so time and play the long-term game?
Thx.
Also, rolling a dice vs. stocks is nothing. Rolling a dice means nothing. You can roll it for 10 years and you still can't be called an expert. So enough with the dice vs. stocks comparison.
Also, I'm not saying I'm somehow better than the pro money managers because I'm not. However, yes I credit myself to playing patient and limiting it to 15 positions. And give it to the managers who play the trading game.
Also, I don't compare myself to money managers. They are traders, they trade daily. I'm not a trader, I'm an investor. Some of you are confusing it. If I trade 5000 times a year vs. 15, then I need to be much more qualified. Duh!
Now back to the real topic: why do money managers need to trade 5000 times vs. 500 or so time and play the long-term game?
Thx.
You continue to miss the point of the dice analogy and keep focusing on the non-analogous parts.
Ill say it another way. If 1 million people randomly choose one stock at the begining of the year and sell it at the end of the year, a certain percentage of those people will have beaten your returns, using pure chance. Some, by a very large margin.
The point is, you have not said anything that leads me to believe you are simply not one of these people near the end of the dumb luck bell curve.
I havent seen any evidence that your returns are actually based on your research instead of sheer dumb luck.
Ill say it another way. If 1 million people randomly choose one stock at the begining of the year and sell it at the end of the year, a certain percentage of those people will have beaten your returns, using pure chance. Some, by a very large margin.
The point is, you have not said anything that leads me to believe you are simply not one of these people near the end of the dumb luck bell curve.
I havent seen any evidence that your returns are actually based on your research instead of sheer dumb luck.
Stocktrader,
Dragon isn't really being difficult here. The issue is that the markets are statistical beasts so, with a small sample size (less than the absolute minimum 30 trades) its very hard to have any evidence that its not just luck.
To generate evidence you really need a lot more trades or to reveal enough method to find out that its equivalent to some method that did generate a lot more trades.
All of us who've been around a while have seen "great traders" become "non-traders" when market conditions changed. Its part of the joy of trading
Dragon isn't really being difficult here. The issue is that the markets are statistical beasts so, with a small sample size (less than the absolute minimum 30 trades) its very hard to have any evidence that its not just luck.
To generate evidence you really need a lot more trades or to reveal enough method to find out that its equivalent to some method that did generate a lot more trades.
All of us who've been around a while have seen "great traders" become "non-traders" when market conditions changed. Its part of the joy of trading
Your first question begs for a bit more specificity. What market do you want to "beat" and what is the definition of "beating the market"? I am quite satisified with an ATS I run that returns jjust north of 1% per month with 1/3 - 1/4 the risk of the S&P500. Do I beat the market? Probably not, from the standpoint of someone who doesn't understand statistics and the tradeoff between risk and return.
Your second question is much easier to answer: most probably you have had luck on your side. Two years papertrading doesn't add anything to analyzing whether you are lucky and two years of actual returns is not enough data. In addition your smals number of holdings doesn't lend itself to being compared with the "market". Why do you care if you beat the market? I can guarantee you will not beat the market if you do.
Well, yes, I can agree with you there, TraderDragon. A lot of people fall in the right place at the right time and get rich.
Since things fall back to the number of trades. Let's say I continue to long-invest (10 - 15 trades per year) for the next 10 years, and the number of trades wouldn't even compare to the number of trades some of you do per month. In that case, would you still call it sheer luck with a 30 percent compounded ROI? And hopefully, in those 10 years, we'll experience both up and down markets to really test my knowledge.
Since things fall back to the number of trades. Let's say I continue to long-invest (10 - 15 trades per year) for the next 10 years, and the number of trades wouldn't even compare to the number of trades some of you do per month. In that case, would you still call it sheer luck with a 30 percent compounded ROI? And hopefully, in those 10 years, we'll experience both up and down markets to really test my knowledge.
I consider the SP500 the market and it's 14.9 YTD return. I don't care whether or not I beat the market, but that's generally the consensus when talking about funds and how they did compared to the market. I was just curious.
So essentially it all boils down to long-term returns to add credibility, correct?