Global Economic Intersection
Advertisement
  • Home
    • 카지노사이트
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
    • 카지노사이트
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Don’t Chase Returns in 2015!

admin by admin
January 8, 2015
in Uncategorized
0
0
SHARES
1
VIEWS
Share on FacebookShare on Twitter

by Chris Mayer, Daily Reckoning

“Year: a period of 365 disappointments.” – Ambrose Bierce, The Devil’s Dictionary

The year 2014 was one of the worst ever for stock pickers. But almost everyone thinks about this in the wrong way. And it could cost you a lot of money in the long run if you think this way too. I’ll tell you how I think about it instead below.

First, some evidence:

  • Bank of America Merrill Lynch research shows fewer than 20% of active managers are ahead of the market this year, the worst performance for more than a decade
  • Bill Alpert at Barron’s: “Less than 15% of the money managers who actively select stocks are ahead of their benchmarks”
  • Denys Glushkov, a researcher at Penn: Only 9.3% of all mutual funds that invest in big U.S. stocks such as those in the S&P 500 are ahead of the index through Sept. 30. The previous low was 12.9% in 1995, and the average over the past quarter century is 38.6%.

Glushkov says that 2014 “is likely to enter the record books” as the year when active managers – as opposed to index funds – “delivered their worst performance relative to the index, net of fees, since at least 1989.”

Case closed.

Faced with that experience, people are pouring money into passive funds – like S&P index funds. As nearly everyone knows, the universe of stock pickers can’t beat the market, because of fees. Still, this year was an epic rout.

There’s been a lot of ink about why this is. I don’t really care about it, because I think we’re all guessing. And secondly, even if we knew, it doesn’t mean we’d be able to predict when things would change.

So here’s part one of my advice: Ignore all talk about trying to explain it. Don’t try to chase returns, because doing so will cost you a lot of money over time.

Don’t try to chase returns, because doing so will cost you a lot of money over time.

Most people won’t do that. Most people chase returns. As an example, consider one of my favorite studies of all time by Dalbar. It showed that the average mutual fund earned a return of 13.8% per year over the length of the study. Yet the average investor in those funds earned just 7%. Why?

Because they took their money out after funds did poorly and put it back in after they had done well. Investors were constantly chasing returns.

Another favorite example is Ken Heebner’s CGM Focus Fund. It was the best fund of the decade ending 2010. Heebner’s fund turned in a sparkling 18% return. Yet the typical investor in his fund earned just 11%. Same thing: People pulled money out when they had an off year and plowed it back in after they had a great year.

I wrote about this in my first book, Invest Like a Dealmaker. And the advice I gave there is still the advice I give today. To illustrate that advice, let’s look at how Mohnish Pabrai answered a question put to him by Barron’s.

Pabrai’s fund has returned close to 10% over the last 10 years, beating the index by about 1.5 percentage points. But he’s well behind the index this year. Here’s Barron’s:

“When asked about this underperformance, he replied, ‘I think it is an irrelevant data point. There is nothing intelligent that one can say about short periods like 10 months. I never make investments with any thought to what will happen in a few months or even a year.’” [Bold added.]


What is the Income Play Rich Investors Love? (Hint: It’s Tax-Free)


Amen to that.

The problem with the 24/7 media culture we live in is that everybody has to have something to say almost all the time. And yet most of the time, there really isn’t anything worth saying.

So we get incessant daily commentary on every blip in stocks, gold, bonds and so forth. It’s all meaningless drivel. I’m with Pabrai: There really isn’t anything intelligent to say about returns over such a short period of time.

In fact, I’ll go further: I don’t think you should compare yourself with the S&P 500, or the broader market, at all.

Here’s what Martin Whitman, one of my favorite investors, has to say about it:

“Certain economists believe strongly that the goal of professional money managers is to beat the market. If professional money managers fail to beat the market either individually or en masse, this it taken as evidence that they are useless… The kindest word we have for this point of view is that it is amateurish.” [Bold added.]

This is from Modern Security Analysis by Whitman and Fernando Diz. If I had to pick an investing bible, this would be mine. I love the approach, and Whitman has had a big influence on how I think about investing over the years.

The reason Whitman has such disdain for the market-beating point of view is that managers have different goals and duties. A manager investing for an endowment may aim for safety and income over capital gains. Thus, if such a manager turned in a 9% return with a portfolio of conservative names that never missed a dividend, it seems silly to rip him for trailing the S&P.

Besides, who cares about one year?

You have to play the long game. And anyway, there are approaches and investors who have beaten the market by a solid margin over time. The thing is, they seldom beat the market consistently.

The best investors lag the market 30-40% of the time. As Barton Biggs once wrote after analyzing the stellar returns of superstar investors:

“None in the group always beats the S&P 500 probably because no one thought that was the primary objective.”

There are ways to beat the market over time. My own CODE approach – what I use to guide my Capital & Crisis readers -is one of them, with an annualized return of 16% over the last decade, more than three times the S&P 500. But none of these approaches always beats the market. Even the best lag it, and often.

Keep that in mind before you reshuffle your portfolio after looking at year-end results. Don’t chase returns!

Previous Post

Hard Evidence: Can Germany Throw Greece a Lifeline and Save the Euro?

Next Post

Deaths From Drug-Resistant Infections Set To Skyrocket

Related Posts

Unlocking the Future: Google's Game-Changing Move to Advertise NFT Games Starting September 15th
Business

Unlocking the Future: Google’s Game-Changing Move to Advertise NFT Games Starting September 15th

by John Wanguba
September 8, 2023
Bitcoin Is Finally Trading Perfectly Like 'Digital Gold'
Economics

Bitcoin Is Finally Trading Perfectly Like ‘Digital Gold’

by John Wanguba
August 5, 2023
Can Worldcoin Overtake Bitcoin?
Economics

Can Worldcoin Overtake Bitcoin?

by John Wanguba
August 4, 2023
Bitcoin Is Steady Above $29,000 Awaiting US NFP Figures
Economics

Bitcoin Is Steady Above $29,000 Awaiting US NFP Figures

by John Wanguba
August 4, 2023
Namibia Will Regulate And Not Ban Crypto With New Law
Finance

Namibia Will Regulate And Not Ban Crypto With New Law

by John Wanguba
July 25, 2023
Next Post

Deaths From Drug-Resistant Infections Set To Skyrocket

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin market blockchain BTC BTC price business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe Federal Reserve finance FTX inflation investment market analysis Metaverse NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • Unlocking the Future: Google’s Game-Changing Move to Advertise NFT Games Starting September 15th
  • Bitcoin Is Finally Trading Perfectly Like ‘Digital Gold’
  • Can Worldcoin Overtake Bitcoin?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.