Do You Think You Can Beat the Market?

[Hawgdriver]

Make sure to fw the article to Bill Gross. Or Bill Miller circa 2006.

[Fuzzy]

Just curious: The complaint seems to be that "active funds lag behind their index counterpart", and the conclusion is that you ought to invest in the an "index fund". But an index fund should obviously also lag its counterpart (by the expense of running the fund), and hence there is no way to "beat the market" there either, and you are just paying someone to stay just a little behind what some arbitrary measure of "the market" is, rather than investing for some particular purpose.

Has there been any study that compares the active fund to the index fund and factors in the "active share"? (active share, as I understand it, accounts for the fund holdings that are different from the index holdings) There ought to be some way of measuring whether someone acting differently than the index can do better than the index, as opposed to what seems like the current measure of how someone doing things the same as the index is not able to beat it?

[Colymbosathon ecplecticos]

Originally Posted by Fuzzy

Has there been any study that compares the active fund to the index fund...

Yes, numerous ones. Almost everybody should invest in low-expense broad-based index funds.

Even if you want an active component, you should do it as an overlay (over a broad index fund) to minimize expenses and current taxes.

[Kenny]

Originally Posted by Colymbosathon ecplecticos

Yes, numerous ones. Almost everybody should invest in low-expense broad-based index funds.

Even if you want an active component, you should do it as an overlay (over a broad index fund) to minimize expenses and current taxes.

?

[FAS158]

Originally Posted by Fuzzy

Has there been any study that compares the active fund to the index fund and factors in the "active share"? (active share, as I understand it, accounts for the fund holdings that are different from the index holdings) There ought to be some way of measuring whether someone acting differently than the index can do better than the index, as opposed to what seems like the current measure of how someone doing things the same as the index is not able to beat it?

I think you may be referring to 'misfit' return portion of active return.

I am a bit rusty but I think its the difference between manager benchmark return and investor b'mark return (or asset category b'mark return).

Its expected value is zero but it does exist and is desirable.

I havent seen any studies or data that identifies it.

My position BTW is, you cant beat the market on a consistent basis by investing in stocks. You can make money in private equity market by identifying opportunities, but you are likely not to make money in hedge funds.

[zeroEthix]

you have to beat it over 50 years to claim you beat the market

[The President]

lolz at Paulson's largest fund being down 47% this year.

[Dismal Science]

Originally Posted by The President

lolz at Paulson's largest fund being down 47% this year.

I thought that was lulz-worthy as well.

[axjoke]

Originally Posted by The Sad Man

1/15/2008
As I said before, axjoke, come back after 10+ years with that record and then I'll take you seriously. Didn't you also buy the performance chaser's wetdream, HANS, awhile ago only because you personally drank several Monsters/week?

Not trying to put you down as I'm sure you're thinking this through, just that you shouldn't declare victory over EF yet.

So I crushed the market in 2008, trailed a little in 2009, beat the market in 2010, crushed the market in 2011 and am a little ahead in 2012. Been investing for over 10 years now although the first two were subpar but they were also the years that tought me to think differently. I imagine you still consider me either lucky or a liar.

Just saw that Monster Beverage (HANS) was getting added to the S&P 500. What did you call it? A performance chasers wet dream?

And no, I made no more money on my long of it than I lost on my even worse calls to short APPL around 100 (ZUNE competition?) or Starbux short (consumers moving down) over the past several years since I've had no position in any of them. Just saw the news and thought fondly of our previous conversations.

[Dismal Science]

Large Wall Street Banks can apparently beat the market.

In the second quarter Goldman Sachs only had trading losses on 6 days. Morgan Stanley on 15 days, Bank of America on 3 days. JP Morgan was the worst with losses on 28 days due to their London Whale positions.

http://online.wsj.com/article/BT-CO-...09-712959.html