Do You Think You Can Beat the Market?

[axjoke]

Eugene, would +29% on the year be considered beating the market?

[zeroEthix]

Shorts pay off this week?

[axjoke]

Originally Posted by zeroEthix

Shorts pay off this week?

Yeah, several of them worked very well. On a dollar basis Lehman was the star. Not a huge recent swing.. maybe 6%.

[BanillyDad]

It would be foolish to think the market can be beat in the long-term per se, but I certainly think a joe-actuary investor could, by taking a value investing approach, expect to beat the "market less investment expenses" return. Wall street investors think too heavily about short term returns that will yield them short-term bonuses or promotions. Therefore, you don't need to know more than "the market knows", you just need a different time horizon. If you have 50K to invest and are moderately informed, picking 15 stocks on a buy-and-hold strategy would have better prospects than a mutual fund with 1% or so yearly commissions doing the same thing. I'll take 0% commissions over 1%.

[Bubba Colbert]

Originally Posted by BanillyDad

I'll take 0% commissions over 1%.

No one trades at 0%. And if you never sell then you never make a profit.

And buy and hold sounds good in theory, but I bet there are a few "blue chip" stocks that you might have named 10 years ago that haven't done too well.

And yes you can name some ok ones with hind sight, but 20/20 hindsight doesn't work for the future.

On top of that, there is often risk assumed with increased returns. It may be true that I can pick 10 stocks and most of the time the 10 stock portfolio will beat the market. But have I not assumed more risk in being less diversified with only 10 positions? What happens to my portfolio if one of my 10 positions turns out to be an Enron or Bear Stearns that looked good on paper when I implemented my buy and hold strategy?

[notreallyme]

Originally Posted by Bubba Colbert

No one trades at 0%.

I pay $10 per trade, that is pretty close to 0%. If you are only going to one number of accuaracy I would call it correct (i.e. 0.000% would not be correct but 0 can go from 0 to .49999....)

And I think there are some stocks you can buy direct where it really is 0% exactly. Not sure how that works exactly.

[Bubba Colbert]

Originally Posted by notreallyme

I pay $10 per trade, that is pretty close to 0%. If you are only going to one number of accuaracy I would call it correct (i.e. 0.000% would not be correct but 0 can go from 0 to .49999....)

And I think there are some stocks you can buy direct where it really is 0% exactly. Not sure how that works exactly.

Even if you think your transaction price is $10 per trade, there are still other hidden transaction costs. They make more money off of you by being market makers and the bid ask spread.

[axjoke]

Eugene... even though you wouldn't bet. I thought you would be interested in seeing how well BKUNA is doing these days. Down to $2.48 with a price target of $1 (FBR). Sadly it's not even worth that but some poor suckers will end up buying shares as BKUNA continues to create/dump them.

others of interest:

PMI 4.48
RDN 2.69
ABk 2.1
MBI 6.05 (only holding any value because of the cash they raised but refused to put into their insurance sub)

Financials still suck, book values are a joke... the market isn't that efficient.

[notreallyme]

Originally Posted by axjoke

Eugene, would +29% on the year be considered beating the market?

Obviously risk adjusted you have earned exactly the risk free rate - So no you have not beaten the market. Not even sure what that means but the textbook says it's true!

Maybe in Eugene's world that is all you are allowed to spend and vendors can not accept any dollars above that

[notreallyme]

Originally Posted by Bubba Colbert

Even if you think your transaction price is $10 per trade, there are still other hidden transaction costs. They make more money off of you by being market makers and the bid ask spread.

Good point.

Wehn your mutual fund manager buys into the S&P does he pay the market spread? I really don't know, but there must be some costs.