Quote: (02-21-2013 08:01 PM)BIGINJAPAN Wrote:
Quote: (02-21-2013 07:48 PM)RichieP Wrote:
What do you guys say to the idea that the only winning strategy in the stockmarket, long-term, is an index fund?
Unless you have insider information, how can you possibly hope to do better than the hedge funds who employ hundreds of PhDs to crunch the numbers... there's no way one guy can beat them on prediction, right?
So isn't anything other than a diversified index-fund portfolio just gambling, with backwards-rationalization from the people who got lucky?
Well the great thing about the quants is they aren't as smart as they think they are. You can use that to your advantage. Those guys have to park billions of dollars. You can't do that without people noticing. Also their models do not account for human emotion and greed. Which is a bigger part of trading than technicals or fundamentals.
If you bought an index fund on the Nasdaq in 99 you wouldn't even have 60% of your money back. If you bought the S&P in 2007 you haven't even broken even yet. Fuck if you bought an index fund tied to the Nikkei before 1990 you wouldn't even have 25% of your capital back and it has been over 20 years.
Well, the consensus of the academic literature is that the market cannot be consistently beaten and that the professional managers do not consistently deliver excess returns exceeding the amount of their fees. That said, I would be reluctant to go into an equities index in the absence of a pullback and would want to be diversified among asset classes. And I'm as guilty (greedy) any anyone else of thinking I am going to be the guy to beat the market. And I have in recent years but it was largely luck.