Successful Active Investing Is Hard

Easily? Really? I don’t find it easy at all.

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It is extremely well-documented that, over any realistic investing timescale - say 15 years + - professionals do not find it easy (a kind euphemism for ‘damn near impossible’) to enable their clients to beat the index!

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Easily? Really? I don’t find it easy at all.

It might not be as easy as you want, but it is doable if one is willing to learn and have the courage to do it. Yes I said COURAGE. Many people can find a thousand reasons why they should sell and raise cash for the next time the world will end which they know will be in the next 30 to 60 days. When we finally have a correction and the market swoons the balance of their portfolio drops and they lose anyway. The problem is they weren’t making money when the market was climbing the wall of worry to insulate the correction. Then they run to read a book to tell them 10% is a correction 75% of the time and since this is now 9 years into a bull market so this correction will be larger because the bull market was longer than normal. So they wait while the market turns around and starts up while the economy and world events are still s-h-i-t and they know the market can’t rally under these conditions—So they wait for it to drop again as the market continues up defying the law of gravity. Finally when the market recovers, the courage returns and they buy at high prices, just in time to get whip sawed. And this scenario could take 5 or 10 years or longer to play out.

b&w

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It is extremely well-documented that, over any realistic investing timescale - say 15 years + - professionals do not find it easy (a kind euphemism for ‘damn near impossible’) to enable their clients to beat the index!

Is that because of their excessive fees or their incompetence or both?

b&w

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B&W
you are saying that you have the courage to buy and hold but others do not have the courage to buy near market lows?

For me, I can not predict bull market peaks. But I can usually identify a spot not far from bear market lows.

If picking stocks is tactics , picking asset classes is strategy. Both have their place in winning the investment war. Right now both suggest being in stocks. How deeply in stocks depends on short term risk tolerance, other sources of income, age , lots of personal factors.

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Hi Mauser:

you are saying that you have the courage to buy and hold but others do not have the courage to buy near market lows?

For me, I can not predict bull market peaks. But I can usually identify a spot not far from bear market lows.

I’m glad you are able to identify spots near bear market lows to re enter the market profitably. Some people have problems doing that and never re enter the market again.

b&w

With 100% in an index you will have the certainty that you will not undeperfom it

And in addition you will have the 100% guaranty that you will not beat the index ever.

IMV (In My View):

  1. Historically, it’s impossible to find a 15+ year period in which a DRIP investment in the S&P 500 didn’t increase over inflation.

  2. As an example, Warren Buffet has said that buying an S&P Index fund is the best way to go for most people. In http://www.usatoday.com/story/money/personalfinance/columnis….

  3. Therefore, the “index” is useful as a no-brainer metric useful for deciding if you should make your own investment decisions or not.

  4. The real end goal is not to beat an index, it’s to make money for whatever purpose we want (retirement, new car, kid’s education, etc. But, since we have a good no-brainer alternative, we compare against that.

  5. Making less than the index over a significant period time is unacceptable. If no-brainer beats your brain, do what Buffet suggests.

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“With 100% in an index you will have the certainty that you will not undeperfom it”

“And in addition you will have the 100% guaranty that you will not beat the index ever.”

In the long run very few will beat the index. In the past few years 86% of active fund managers under performed the index. So why not settle with a certainty if we think the market in general will do well in the long run?

or maybe the goal is not about beating the market.

tj

anybody remember the name the index ETF that nearly mimicked Saul’s results?
This board is so long it is hard to back track.

“anybody remember the name the index ETF that nearly mimicked Saul’s results?
This board is so long it is hard to back track.”

Was it the IJS?

Rob

I’m sure “YouAreNumberSix” will be chiming in here momentarily.

IJS was the first ETF Six introduced. I believe the one that tracked Saul’s performance was FDN.

A.J.

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Mauser,

anybody remember the name the index ETF that nearly mimicked Saul’s results?

It was the FDN (First Trust Dow Jones Internet ETF). Large, growth, internet stocks, FB, AMZN, NFLX, GOOGL, CRM, are largest 5 holdings making up 35% of the fund. Year to date it’s up about 10%. I bought some earlier and plan on adding from time to time as I like their holdings and think it will do well over the long term.

thanks