[Australia Sucks]

Mr. Accuride I have personally seen a decline in my portfolio far greater than 50% during the GFC (more than fully recovered the loss though and am doing quite well). If you can't stomach a 50 - 60% decline on the market value of your stock portfolio without blinking you (I mean in general not you specifically) are not fit to be a value investor. It comes with the territory, because value investors do not use stop losses and most of them (including me) don't hedge their positions.

I already covered the argument about time investment. There is a learning curve, you cannot decide to just index and then one day when you have a million dollars to invest decide "right I have enough money to be an active investor so I am going to invest my million dollars actively". You need to cut your teeth on smaller sums of money first. It takes years to get good at investing.

Also as I have pointed out numerous times already I invest in the Australian stock market, so I did not get the same tailwinds that the U.S.A. market got. The Australian share-market (All Ordinaries Index) is still around 15% below its pre-GFC peak. My portfolio has far out-perfomed the Aussie market but I did not get the tailwinds that U.S.A. investors got.

As for value investors trailing the index you are describing fund managers who for a variety of reasons I previously outlined are at a structural disadvantage (despite the additional research fire-power) to private investors. My feeling is that seasoned and experienced private value investors have likely done just fine and probably in aggregate outperformed the index (there are no stats on experienced private value investors so we cannot be sure).

Of course no matter what methodology you use its never guaranteed that you will outperform the index. However the right strategy and the right execution of that strategy will put the odds in your favour.

[Travel Museums]

Indexs are a tried and true PASSIVE investment strategy.

To me defeatism is spending your free time in front of a computer instead of enjoying life.

Work. Put away small amounts over a lifetime in 3-5 Index funds. Retire. Enjoy life.

[Australia Sucks]

Travel Museums that is a nice plan if you want to retire at age 60! I want to retire sometime in my thirties when I am still young enough to enjoy it properly. For most people the only way to retire in your thirties is to be an active investor!

[Travel Museums]

Yes that's the way it works unfortunately. I was lucky. I worked with my family from a small child until my early 20s. Still took 20 years and I'm only a budget traveler. Most people laugh at my frugality. And I plan to work again once I settle down and start a family.

Index funds are still your best bet imho. When you actively manage your investments the hours and stress is essentially moonlighting.

[Australia Sucks]

Here is a good link discussing passive versus active investing:

http://www.retailinvestor.org/activeVSpassive.html

[Australia Sucks]

This is from a Q&A session with Charlie Munger. Read pages 13 and 14. He recommends that investors who know what they are doing do not need to own more then 3 stocks.

http://www.vgipartners.com/wp-content/up...y-2017.pdf

[Vicious]

Beating the index is very hard, it can of course be done but if you put your savings (especially anything earmarked for your pension) spread out in different index funds with low tariffs you are going to be doing several points better than just keeping them in a savings account.

The time and effort for a layman spent trying to beat the index is better channeled into other areas of improvement.

[BB1]

(07-31-2017 12:36 AM)Vicious Wrote:  

Beating the index is very hard, it can of course be done but if you put your savings (especially anything earmarked for your pension) spread out in different index funds with low tariffs you are going to be doing several points better than just keeping them in a savings account.

The time and effort for a layman spent trying to beat the index is better channeled into other areas of improvement.

Actually thrashing the index is ludicrously easy.

Simply put your savings into shares of Berkshire Hathaway (BRK-B).

Long term comparison of Berkshire (blue line) verses the S&P 500 index :

https://finance.yahoo.com/chart/BRK-B#ey...I6Im1heCJ9

[Australia Sucks]

http://www.retireondividends.com/ This is a good website for beginner investors to look through.

[Vicious]

(07-31-2017 10:06 AM)BB1 Wrote:  

Actually thrashing the index is ludicrously easy.

Simply put your savings into shares of Berkshire Hathaway (BRK-B).

Long term comparison of Berkshire (blue line) verses the S&P 500 index :

This is called hindsight.

Telling people to pool their savings in one place instead of diversifying is highly dubious. New poster telling people to put all their money in a specific fund - not shady at all.

[Travel Museums]

You can also copy warren buffets portfolio shown in his public filings. There's programs/services that do this.

BRK is a great company but it's one company. You're not diversified. Yes they are a holding company but they're not immune to SEC proves and it's happened before.

About beating the market: Yes you can do it. And people do it from time to time. How? Insane hard work. To maybe beat it a few years out of 80 in your lifetime?

Hmm maybe I'll pay 1% to a suited up idiot instead. Let him worry and do the work. Oops that 1% yearly loss compounds and now you have $250,000 less money.

Invest regularly in indexes, etf, blue chip, dividend, bonds, etc. Beat the market often and when you don't be about on par. Zero effort.

All your extra time and effort can go into productive stuff that you enjoy.

[Australia Sucks]

Travel Museums on the topic of diversification I refer to my previous post on this thread (its further up this page)
thread-63817...pid1621759

[Australia Sucks]

However I think for those who decide on index investing at the moment they should be lloking at small cap value ETFs, emerging market ETFs and dividend focused ETFs. Bcause small cap value and reliable dividend payers both have a history of outperfoming the general S&P 500 funds and as for emerging markets they currently look like better value than U.S. markets.

http://etfdb.com/etfdb-category/small-ca...-equities/

https://seekingalpha.com/article/4061624...rrific-etf

http://etfdb.com/etfdb-category/emerging...-equities/

[lavidaloca]

For all intensive purposes individual investors that don't have large windfalls are probably not going to have substantial enough money in the market that it is really worth their time to actively invest as opposed to passively purchase indexes and / or blue chip equities.

By the time even well off people have enough skin in the game for a percent or two to really make a difference they are likely to be staring retirement in the eye.

Beating the market by 5% on a consistent basis is rather improbable unless your not diversified and accordingly recognize that you may very well lose to the market by 5% on a consistent basis as well.

I recognize that some people have the talent and ability to beat the market substantially with smaller portfolios as opposed to the funds they manage. This is a minority. You honestly will probably not get to that point unless it's a full time job for you.

People have mortgages to pay, kids to put in school. The amount of people making substantial equity purchases yearly is very small.

[BB1]

(08-01-2017 07:47 AM)Vicious Wrote:  

(07-31-2017 10:06 AM)BB1 Wrote:  

Actually thrashing the index is ludicrously easy.

Simply put your savings into shares of Berkshire Hathaway (BRK-B).

Long term comparison of Berkshire (blue line) verses the S&P 500 index :

This is called hindsight.

Telling people to pool their savings in one place instead of diversifying is highly dubious. New poster telling people to put all their money in a specific fund - not shady at all.

I consider owning shares of Berkshire Hathaway is less risky that the S&P 500 index. Warren Buffett has engineered the company to be bulletproof.

Lets check back in one year and see which has done the best. As I type BRK-B is $175.91 and SPY is $247.24

[Australia Sucks]

Just as a point of interest for readers in countries such as Australia or Canada where the market is resources heavy (e.g. lots of mining and energy stocks) over the long-term resource stocks under-perform. Personally I have never been a fan of resource stocks.

https://www.motivatedmoney.com.au/mysay....ueuf2ddua0

The link above has a graph of long-term returns in the Australian share market comparing the broad market (All ordinaries), to the All Industrials index to the resources index.

You can see the resources component severely under-performs. Resource stocks are inherently risky and speculative. The reason resource stocks under-perform is because they are difficult companies to manage you never know what exactly will be in the ground until its too late, costs are volatile, commodity prices are volatile and difficult to predict and investment cycles are long so if a company invests in projects when commodity prices are heading for an extended downturn they will get burnt. Also cash-flow to invest for expansion and takeovers typically is more available when commodity prices are very high (and soon to head into a downturn).

Its okay for people who want to pick individual stocks or who want to cyclically time their entry and exit from these resource stocks/indices but for buy and hold indexers they should try to avoid resource stock exposure as a general rule.

[Travel Museums]

A diversified intl small cap index/emerging market is a good investment but in the long term you want the bulk in US/western stuff. Too many shmuck dictators, coups, defaults, etc.

THE USA ECONOMY WILL ALWAYS GROW.

If this fails to happen your money will be worthless anyway.

[Jetset]

(08-01-2017 12:40 PM)Travel Museums Wrote:  

A diversified intl small cap index/emerging market is a good investment but in the long term you want the bulk in US/western stuff. Too many shmuck dictators, coups, defaults, etc.

THE USA ECONOMY WILL ALWAYS GROW.

If this fails to happen your money will be worthless anyway.

"THE ROMAN EMPIRE WILL ALWAYS GROW" - Bagholderus Maximus, 453 AD

[Travel Museums]

And when Rome collapsed we had a millennium of feudalism = coin worthless anyway.

So either invest in your cloistered paradise now or invest for a "short" retirement. Stop worrying about the next 800 years. You'll be dead.

The US War machine will keep chugging for generations. If you're really that worried about a US default you should be learning Mandarin.

Ps Please let me know where you're cloistered paradise is located. My band of merry marauders will want to hit you over the head and pillage it

Pps Buffet eats McDonalds for breakfast and swills Coca Cola every afternoon. Sometimes I think it's his private joke on the world that makes him enjoy it so much. But like the rest of us he's just taking the easy route because he doesn't care. His cop out is to donate away his fortune to the Gates Foundation which does have worthy causes like ending infectious diseases. No more great art collections and museums (oops Walmart did that) that's mostly an Asian thing now.

[Vicious]

(08-01-2017 11:38 AM)BB1 Wrote:  

I consider owning shares of Berkshire Hathaway is less risky that the S&P 500 index. Warren Buffett has engineered the company to be bulletproof.

Lets check back in one year and see which has done the best. As I type BRK-B is $175.91 and SPY is $247.24

You still don't get it. I own BRK-B. I have a part of my daughter's savings in it. I do not doubt its value.

What I doubt is taking advice from someone with an all eggs in one basket strategy.

[Jetset]

(08-01-2017 01:03 PM)Travel Museums Wrote:  

And when Rome collapsed we had a millennium of feudalism = coin worthless anyway.

Specifically, the ruins of the Roman Empire had a millenium of feudalism, while neighboring regions got fat on the scraps. It didn't lead to a global market collapse.

Quote:

So either invest in your cloistered paradise now or invest for a "short" retirement. Stop worrying about the next 800 years. You'll be dead.

The US War machine will keep chugging for generations. If you're really that worried about a US default you should be learning Mandarin.

Historically, international stocks have been high performers. Although more recently, they've converged with U.S. stocks, it doesn't follow that they aren't an essential part of a diversified portfolio.

I don't disagree with the statement that you want the "bulk" in U.S. equities. I do disagree with the statement that the U.S. economy will always grow and that if it fails to happen, there's no point in global diversification.

[Travel Museums]

Being diversified is what you want. The point I'm making is that a marginally better return isn't worth the added risk of putting the bulk of your money in emerging markets.

When the USA sneezes the rest of the world catches a cold. In other words we are the vacuum for all the mass produced crap of the world.

[Jetset]

(08-02-2017 11:45 AM)Travel Museums Wrote:  

Being diversified is what you want. The point I'm making is that a marginally better return isn't worth the added risk of putting the bulk of your money in emerging markets.

When the USA sneezes the rest of the world catches a cold. In other words we are the vacuum for all the mass produced crap of the world.

Fair enough, and no, I don't believe in overweighting emerging markets. I do believe in giving plenty of weight to international developed markets, though.

[Australia Sucks]

My argument for investing more in emerging markets vs the U.S. is based on valuations. I am not saying people should always be overweight emerging markets, but currently the valuations of emerging market stocks are much more attractive then the U.S. so right now index investors should be overweight emerging markets. Of course in the future it is possible that valuations on U.S. stocks could become more attractive and if that happens index investors should weight back towards U.S. stocks.

[Australia Sucks]

(08-01-2017 11:35 AM)lavidaloca Wrote:  

For all intensive purposes individual investors that don't have large windfalls are probably not going to have substantial enough money in the market that it is really worth their time to actively invest as opposed to passively purchase indexes and / or blue chip equities.

By the time even well off people have enough skin in the game for a percent or two to really make a difference they are likely to be staring retirement in the eye.

Beating the market by 5% on a consistent basis is rather improbable unless your not diversified and accordingly recognize that you may very well lose to the market by 5% on a consistent basis as well.

I recognize that some people have the talent and ability to beat the market substantially with smaller portfolios as opposed to the funds they manage. This is a minority. You honestly will probably not get to that point unless it's a full time job for you.

People have mortgages to pay, kids to put in school. The amount of people making substantial equity purchases yearly is very small.

Lavidaloca any young single guy who is frugal and has a good salary can probably put aside say at least $20,000 per year for investment.

Sure the returns from earning a return 3% higher than relevant index fund(s) (from out-performance due to stock picking) on $20,000 is only $600 so its not worth it. But you are hopefully getting better and building your skill-set as an investor to prepare for when you have more money. You have to look at the long-term picture, maybe after ten years of investing $20,000 maybe you have a $300,000 portfolio ($200,000 investment + $100,000 in returns). An extra 3% out-performance on $300,000 is $9000 per year extra.

Now lets say when you have $300,000 you keep investing $20,000 per year. After another 5 years later you might have $500,000 ($300,000 + $100,000 in extra investment + $100,000 in returns). An extra 3% out-performance on $500,000 is an extra $15,000 per year. Lets say in another 5 years of investing an extra $20,000 per year +the returns generated from the portfolio you have $750,000. 3% out-performance on $750,000 is an extra $22,500 per year. Maybe in additional 10 years from that point by still investing $20,000 per year plus the portfolio returns generated maybe the person has $1.8 million dollars. 3% out-performance on $1.8 million is an extra $60,000 per year!! You can see that in the beginning active investing is a lot of work for marginal reward but for an investment time horizon spanning multiple decades it really does pay off. Its no doubt a simplified example but even if you adjust the figures for inflation its still quite rewarding over the long-term.

Yes the first few years of active investing has a steep learning curve where you have to read and study intensively but after that period an share portfolio can be easily be managed on less than less than 100 hours per year of effort (I am including the general finance/economics/history reading and reading of newspapers, etc in this). Its hardly a full time job if you have a long holding period and low portfolio turnover. If for example you buy 3 stocks and sit on them for 5 years how much work is that? Yes the initial research period needs a lot of work but after that its not so much work to stay up to date. Of course if you are a hyperactive trader then it could become a full-time job.

Beating the market is a little bit difficult but its not rocket science!! The passive/index guys always talk about it like its the hardest thing in the world.