CNBC - Better Call Saul

Who would’ve thunk that investing to beat the majority of active investors was as simple as buying some index funds and then just go golfing?

According to Larry Swedroe of Buckingham Wealth Partners:

“We know that if you just passively invest in these index funds, you get market returns, which means you outperform or get higher than average returns than the vast majority of active investors.”

Supposedly, these outperforming fund managers have technological advantages and have magic powers that allow them to “exploit” the retail investor community. You know that community right? The community that the Wall Street empty suits refer to as “dumb money”.

Don’t worry Mr. Dumb Money, ‘ol Larry Swedroe is looking out for, with a gentle condescending pat on the head as he walks you out of the boardroom when he says: “If you really want to keep it very simple, you can basically own a Vanguard Total Stock Market Fund for the U.S., a Vanguard Total International Fund and own a Treasury bond or, better even yet, build your own portfolio of [certificates of deposit], and that’s all you need."

Gee Willikers! Mr. Swedroe. Thank you for looking out for me and giving me some swell advice!

But hey guys, no need to worry, we also have Dave Nadig of ETF Trends looking out for us as well when he states: “Don’t have the assumption that you’re somehow going to do better than a passive portfolio because the math is just not with you. It doesn’t make it wrong. It just means it’s non-economic."

Perhaps CNBC and our friends Larry and David “Better Call Saul”.


Sorry; should have provided link to article:

Admin please delete if not allowed.

I was telling a buddy whom sells index products about the amazing returns that we are getting in this group. He condescendingly said, who do you think you are, you can’t do that long term. You gonna lose all your money without even really asking what we were doing. He said, Warren Buffett proved an index fund is superior to picking stocks as he won the beat against the hedge fund, and you think you can do better (I knew about this bet already.) I guarantee you my fund will beat whatever you are doing in 15 years…

Well thanks to this group, my stocks have increased 100 percent this year alone. Takes his fund when you take into account the rule of 72 much much longer to get a 100 percent gain, if he can even avg 10 percent in that fund it will be a little over 7 years to get what I got so far this year… oh well. But thanks Saul for being the leader of this amazing group.


Who would’ve thunk that investing to beat the majority of active investors was as simple as buying some index funds and then just go golfing?

Anyone who knows that wealth (the market?) does not have a normal or bell shaped but a Pareto distribution. In a perfect normal distribution the average and the mean are the same. Not so in the Pareto distribution where the average is much higher than the mean.

February 20, 2011
Why Does the Average Mutual Fund Underperform?…

Much of the financial industry is still predicated on the normal distribution because the mathematics of normal distributions are simple and well understood. Believe it or not the Noble Prize winning Black-Scholes option pricing model uses the normal distribution!

For more information read The Misbehavior of Markets: A Fractal View of Financial Turbulence by Benoit Mandelbrot…

and The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb…

Denny Schlesinger


Well, this thread is Off-Topic of course, so let me try to bring it to an end.

The issue isn’t whether intelligent stock picking can beat the market averages, we do it almost every year, and often by HUGE amounts, so of course we can beat any ETF, which is just meant to give you the market average.

The issue is why can’t any mutual fund, ever, get results like we do. The answer is simple and practical and doesn’t require theories or books. The smartest mutual fund manager has a whole bunch of rules he has to follow. He can’t have a seven stock concentrated portfolio but has to have 50 or 100 or 200 or more stocks. He’s working for a mutual fund family and has a boss, who will wonder why he bought this or that non-conventional position, so there is a natural push for the conventional. Customers tend to pour money in at the peak, so he has to buy a lot more at those times (he has rigid rules about how much he can keep in cash), and then he has to sell at the low when customers get scared and pull out. The poor guy doesn’t have a chance compared to us.

And then there are hedge funds. I’ve often wondered why they do so poorly as a class, in spite of their hype and high fees. Well they invest in a lot of zero-sum investments. For example, the smart guy in charge of one hedge fund thinks the dollar will go up so he buys dollar contracts long. Another smart hedge fund manager thinks it will go down, so he sells the same dollar contracts short. In the end, one of them makes, say, $1,324 per contract and the other loses $1324 per contract. There is no wealth created, the way there is with stocks long term.

Now, unless you have something you feel you just must say, lets get back to discussing individual stocks.