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Thread: Pro stock pickers can't beat the S&P

  1. #1
    .


    it's old news but the article has some pretty interesting stats and commentary


    over 3 years 74.3% of actively managed mutual funds trailed the S&P index

    over 5 years 86.5% underperformed

    over 10 years 91.4% underperformed

    over 20 years 94.8% underperformed



    https://www.nytimes.com/2023/04/14/b...lumnist%20says.


    .
    the foolish sayings of a rich man often pass for words of wisdom by the fools around him

  2. #2
    Originally Posted by Half Smoke View Post
    .


    it's old news but the article has some pretty interesting stats and commentary


    over 3 years 74.3% of actively managed mutual funds trailed the S&P index

    over 5 years 86.5% underperformed

    over 10 years 91.4% underperformed

    over 20 years 94.8% underperformed



    https://www.nytimes.com/2023/04/14/b...lumnist%20says.


    .

    should have been more clear

    was referring to the S&P 500 Index


    .
    the foolish sayings of a rich man often pass for words of wisdom by the fools around him

  3. #3
    Paywalled.

    I find active management to be somewhat of a conundrum because if I'm incapable of picking my own stocks, then I'm probably also incapable of picking a manager.

    I may be missing out, but I don't own any mutual funds other than money-markets priced at $1. My biggest complaint is the once a day pricing. Occasionally if I run across a manager who seems smart, I'll look at his holdings for individual stock ideas.

  4. #4
    Its true that there is pretty much no one that can outperforn these large, general indexes like the S&P 500, and yet this doesn't stop us, or most of us. There is a whole industry worth billions made just for retail traders, beginers who think they will be the one to win the market.

  5. #5
    Originally Posted by Chipychip View Post
    Its true that there is pretty much no one that can outperforn these large, general indexes like the S&P 500, and yet this doesn't stop us, or most of us. There is a whole industry worth billions made just for retail traders, beginers who think they will be the one to win the market.
    I can't brag too much - I'm not fabulously wealthy - but I'm way, way beyond what the average is

    about 45 years ago I read a book that indicated the best strategy for a novice was to buy and hold the S&P 500 index or a comparable index

    that's what I did - doing nothing other than pouring money into the indexes whenever I had some

    bear market, bull market - it didn't matter- I did the same exact thing

    the net increased dramatically - profits and then profits on those profits

    the great irony of it all - basically I succeeded (in my view) by doing almost nothing - I did virtually no trading at all - other than buying when I had funds - and it didn't matter the condition of the market at the time


    to me, it's really kind of comical - others sweating the ups and downs - I barely paid any attention to them - as long as there was no tragedy in my life requiring an outlay of big bucks I could do this


    .
    the foolish sayings of a rich man often pass for words of wisdom by the fools around him

  6. #6
    Originally Posted by Half Smoke View Post
    Originally Posted by Chipychip View Post
    Its true that there is pretty much no one that can outperforn these large, general indexes like the S&P 500, and yet this doesn't stop us, or most of us. There is a whole industry worth billions made just for retail traders, beginers who think they will be the one to win the market.
    I can't brag too much - I'm not fabulously wealthy - but I'm way, way beyond what the average is

    about 45 years ago I read a book that indicated the best strategy for a novice was to buy and hold the S&P 500 index or a comparable index

    that's what I did - doing nothing other than pouring money into the indexes whenever I had some

    bear market, bull market - it didn't matter- I did the same exact thing

    the net increased dramatically - profits and then profits on those profits

    the great irony of it all - basically I succeeded (in my view) by doing almost nothing - I did virtually no trading at all - other than buying when I had funds - and it didn't matter the condition of the market at the time


    to me, it's really kind of comical - others sweating the ups and downs - I barely paid any attention to them - as long as there was no tragedy in my life requiring an outlay of big bucks I could do this


    .
    One thing about the S&P 500 is that so much money has poured into those funds that it seems like price discovery is not so much a thing. All the money is just blindly piling in via investments in index funds. It seems like this trend would break at some point.

    The other thing is that it also seems that these index funds can't take advantage of a possible downturn in the market. I'm biased towards negative occurances but I suspect we're in for a correction. Maybe not but the upside of going to cash seems better than keeping it all in S&P 500 for the near future. Maybe it is good to hold tight - maybe not. It would depend on timing and outcome but with index fund it isn't an option without the holder timing it themselves.

  7. #7
    Originally Posted by accountinquestion View Post
    Originally Posted by Half Smoke View Post
    Originally Posted by Chipychip View Post
    Its true that there is pretty much no one that can outperforn these large, general indexes like the S&P 500, and yet this doesn't stop us, or most of us. There is a whole industry worth billions made just for retail traders, beginers who think they will be the one to win the market.
    I can't brag too much - I'm not fabulously wealthy - but I'm way, way beyond what the average is

    about 45 years ago I read a book that indicated the best strategy for a novice was to buy and hold the S&P 500 index or a comparable index

    that's what I did - doing nothing other than pouring money into the indexes whenever I had some

    bear market, bull market - it didn't matter- I did the same exact thing

    the net increased dramatically - profits and then profits on those profits

    the great irony of it all - basically I succeeded (in my view) by doing almost nothing - I did virtually no trading at all - other than buying when I had funds - and it didn't matter the condition of the market at the time


    to me, it's really kind of comical - others sweating the ups and downs - I barely paid any attention to them - as long as there was no tragedy in my life requiring an outlay of big bucks I could do this


    .
    One thing about the S&P 500 is that so much money has poured into those funds that it seems like price discovery is not so much a thing. All the money is just blindly piling in via investments in index funds. It seems like this trend would break at some point.

    The other thing is that it also seems that these index funds can't take advantage of a possible downturn in the market. I'm biased towards negative occurances but I suspect we're in for a correction. Maybe not but the upside of going to cash seems better than keeping it all in S&P 500 for the near future. Maybe it is good to hold tight - maybe not. It would depend on timing and outcome but with index fund it isn't an option without the holder timing it themselves.
    there is one other advantage to a buy and hold index fund strategy which I forgot to mention - and its a pretty significant one

    no capital gains tax is owed until it's sold and then if its a long term gain (which under my strategy it always is) then no tax is owed to the Feds - the States differ from each other

    the active trader is going to pay cap gains tax every year he is profitable

    I'm paid no tax or almost no tax thru my investment experience -

    as far as the trend breaking at some point - I don't think so - money is also pouring into these individual stocks - this is not a new thing - this has been happening for decades

    but yes, you're right - no taking advantage of a downturn - selling short - that is a very, very highly skilled trader that can be successful at that - so many will fail

    a ton of money is also not in these positions - looking at smaller stocks - people thinking they can beat the market - and realize huge gains


    .
    Last edited by Half Smoke; 08-29-2023 at 02:26 AM.
    the foolish sayings of a rich man often pass for words of wisdom by the fools around him

  8. #8
    .

    correction to above post - Fed cap gains may be zero depending on your income - those with higher incomes will owe some tax

    my reportable income was always lower than the threshold - I never had high paying jobs

    .
    the foolish sayings of a rich man often pass for words of wisdom by the fools around him

  9. #9
    Originally Posted by Half Smoke View Post
    as far as the trend breaking at some point - I don't think so - money is also pouring into these individual stocks - this is not a new thing - this has been happening for decades
    Dow Jones Industrial Average. This chart may be a little out of date, but it's looking good so far!

    Name:  djia 1900s.png
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