"My guy always beats the market"

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barnaclebob
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"My guy always beats the market"

Post by barnaclebob » Fri May 31, 2013 11:42 am

We've all heard people say this while we try our best not to roll our eyes and hold our lips tight. I heard a coworker say this about their Edward Jones adviser and had visions of him throwing 5% of his money into a burning trash can every time he makes a deposit. It prompted me to wonder how many people think they or their advisers "always beat the market" but I couldn't find any good articles or research. Does anyone know of any?

OverTheHill
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Re: "My guy always beats the market"

Post by OverTheHill » Fri May 31, 2013 11:59 am

Just a guess here, but I would guess that virtually nobody who claims to always beat the market has ever beaten the market. Just useless blowhards.

clevername
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Re: "My guy always beats the market"

Post by clevername » Fri May 31, 2013 12:06 pm

I've noticed that when an adviser says they beat the market, or an individual is bragging about how his managed portfolio beat the market, what they really mean is that it beat the S&P500. Nevermind that their portfolio was full of emerging markets, SCV, gold, etc...

Jeff7
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Re: "My guy always beats the market"

Post by Jeff7 » Fri May 31, 2013 12:12 pm

"Hello. I'd like to please get a written guarantee that you can beat the market average, and that if you fail to do this, you will compensate me for the difference. In addition, should you fail to meet your own internal performance benchmarks, I expect to be compensated for that shortfall, and I also expect to see a comprehensive and actionable plan to prevent it from happening again."

I don't think you'll get it. ;)

And I think it might even be illegal to issue such a statement, if that is any indication.


"Pay me several times more than you'd pay a competitor. In return, I offer no guarantees of anything at all."

Wow. What a deal.


clevername wrote:I've noticed that when an adviser says they beat the market, or an individual is bragging about how his managed portfolio beat the market, what they really mean is that it beat the S&P500. Nevermind that their portfolio was full of emerging markets, SCV, gold, etc...
And probably over a carefully-selected period of time. Too often, graphs are used to mislead.
Last edited by Jeff7 on Fri May 31, 2013 12:13 pm, edited 1 time in total.

umfundi
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Re: "My guy always beats the market"

Post by umfundi » Fri May 31, 2013 12:12 pm

It's easy to beat the market if you choose an inappropriate metric for comparison.

Invest in small companies, compare to the S&P 500. Invest in junk bonds, compare to Treasuries. Invest in anything, pick a 5 star Morningstar fund for comparison later on.

Make 100 predictions. Cherry-pick the ones that work out.

Keith
Déjà Vu is not a prediction

Hector
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Re: "My guy always beats the market"

Post by Hector » Fri May 31, 2013 12:19 pm

Jeff7 wrote:"Hello. I'd like to please get a written guarantee that you can beat the market average, and that if you fail to do this, you will compensate me for the difference. In addition, should you fail to meet your own internal performance benchmarks, I expect to be compensated for that shortfall, and I also expect to see a comprehensive and actionable plan to prevent it from happening again."

I don't think you'll get it. ;)

And I think it might even be illegal to issue such a statement, if that is any indication.


"Pay me several times more than you'd pay a competitor. In return, I offer no guarantees of anything at all."

Wow. What a deal.


clevername wrote:I've noticed that when an adviser says they beat the market, or an individual is bragging about how his managed portfolio beat the market, what they really mean is that it beat the S&P500. Nevermind that their portfolio was full of emerging markets, SCV, gold, etc...
And probably over a carefully-selected period of time. Too often, graphs are used to mislead.
funny! whats the point of asking this get this in written when you know it is not possible to get?

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Re: "My guy always beats the market"

Post by White Coat Investor » Fri May 31, 2013 12:25 pm

They also love to leave out the dividends when comparing to the S&P 500.
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YttriumNitrate
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Re: "My guy always beats the market"

Post by YttriumNitrate » Fri May 31, 2013 12:26 pm

deleted.
Last edited by YttriumNitrate on Sat Mar 12, 2016 12:27 pm, edited 1 time in total.

eucalyptus
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Re: "My guy always beats the market"

Post by eucalyptus » Fri May 31, 2013 12:27 pm

My guy Bernie always beat the market.

barnaclebob
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Re: "My guy always beats the market"

Post by barnaclebob » Fri May 31, 2013 12:32 pm

YttriumNitrate wrote:
barnaclebob wrote: It prompted me to wonder how many people think they or their advisers "always beat the market" but I couldn't find any good articles or research. Does anyone know of any?
Warren Buffet has had a good run of beating the market. I believe the standard he uses is the five year average of Berkshire vs. the S&P500. That being said, there's a good chance that streak will come to an end soon.
I know there are examples of people who have beaten the market in the past but there has to be some kind of study or article which says that say 83% of people think they beat the market when in reality only XX% do...

allsop
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Re: "My guy always beats the market"

Post by allsop » Fri May 31, 2013 12:32 pm

barnaclebob wrote:We've all heard people say this while we try our best not to roll our eyes and hold our lips tight. I heard a coworker say this about their Edward Jones adviser and had visions of him throwing 5% of his money into a burning trash can every time he makes a deposit. It prompted me to wonder how many people think they or their advisers "always beat the market" but I couldn't find any good articles or research. Does anyone know of any?
Is the "adviser" beating the market before or after dividends? Even the most inept manager can beat that.

A few years ago several Swedish banks that have a major part of the mutual fund business used indices ex dividends as their benchmarks and after a "PBS" report highlighting this the reporting was changed.

Other, possibly unrelated, good news is that low cost index funds have appeared, in the range from 0.0 to 0.4, with no load fees.
Last edited by allsop on Fri May 31, 2013 12:33 pm, edited 1 time in total.

Rolyatroba
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Re: "My guy always beats the market"

Post by Rolyatroba » Fri May 31, 2013 12:33 pm


nimo956
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Re: "My guy always beats the market"

Post by nimo956 » Fri May 31, 2013 12:41 pm

If you really had actionable knowledge that would allow you to beat the market, would you share it with everyone you knew, publish newsletters, and write articles in finance magazines, or would you trade in your own personal account and make yourself rich? Why do people think advisors are any different? If they had a surefire way of beating the market, why on earth would they tell you?
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Fallible
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Re: "My guy always beats the market"

Post by Fallible » Fri May 31, 2013 1:10 pm

barnaclebob wrote:We've all heard people say this while we try our best not to roll our eyes and hold our lips tight. I heard a coworker say this about their Edward Jones adviser and had visions of him throwing 5% of his money into a burning trash can every time he makes a deposit. It prompted me to wonder how many people think they or their advisers "always beat the market" but I couldn't find any good articles or research. Does anyone know of any?
I actually haven't heard anyone say their advisor "always" beats the market; it's more like "my advisor may not beat it every time, but at least he can beat it more often than your index fund." Have to admit he got that last part right.
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SammyG
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Re: "My guy always beats the market"

Post by SammyG » Fri May 31, 2013 1:16 pm

Don't most of the advisers that show up on "American Greed" always beat the market?

Jeff7
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Re: "My guy always beats the market"

Post by Jeff7 » Fri May 31, 2013 1:42 pm

Hector wrote:
Jeff7 wrote:"Hello. I'd like to please get a written guarantee that you can beat the market average, and that if you fail to do this, you will compensate me for the difference. In addition, should you fail to meet your own internal performance benchmarks, I expect to be compensated for that shortfall, and I also expect to see a comprehensive and actionable plan to prevent it from happening again."

I don't think you'll get it. ;)

And I think it might even be illegal to issue such a statement, if that is any indication.


"Pay me several times more than you'd pay a competitor. In return, I offer no guarantees of anything at all."

Wow. What a deal.


clevername wrote:I've noticed that when an adviser says they beat the market, or an individual is bragging about how his managed portfolio beat the market, what they really mean is that it beat the S&P500. Nevermind that their portfolio was full of emerging markets, SCV, gold, etc...
And probably over a carefully-selected period of time. Too often, graphs are used to mislead.
funny! whats the point of asking this get this in written when you know it is not possible to get?
It's just a scenario to illustrate to someone the reason that their premise simply doesn't make for a good sales pitch:

They're making a claim that they can give you better performance than an index fund, which is why their higher cost will end up being worth it for you.

Ok, fine. Back that statement up with something, like a contract, or written guarantee. What's that? You can't do that? Then why should I pay your fees?



nimo956 wrote:If you really had actionable knowledge that would allow you to beat the market, would you share it with everyone you knew, publish newsletters, and write articles in finance magazines, or would you trade in your own personal account and make yourself rich? Why do people think advisors are any different? If they had a surefire way of beating the market, why on earth would they tell you?
Well...John Bogle did kind of figure out a way to beat most of the "market" that was comprised of active traders: Go for the average.;) And he's certainly helped to share that wealth with very many people.

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Random Musings
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Re: "My guy always beats the market"

Post by Random Musings » Fri May 31, 2013 1:52 pm

That's why I ask Senator's and Representatives for security selection advice. Seems to work out well.

RM
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Redstorm
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Re: "My guy always beats the market"

Post by Redstorm » Fri May 31, 2013 4:30 pm

allsop wrote:
barnaclebob wrote:We've all heard people say this while we try our best not to roll our eyes and hold our lips tight. I heard a coworker say this about their Edward Jones adviser and had visions of him throwing 5% of his money into a burning trash can every time he makes a deposit. It prompted me to wonder how many people think they or their advisers "always beat the market" but I couldn't find any good articles or research. Does anyone know of any?
Is the "adviser" beating the market before or after dividends? Even the most inept manager can beat that.

A few years ago several Swedish banks that have a major part of the mutual fund business used indices ex dividends as their benchmarks and after a "PBS" report highlighting this the reporting was changed.

Other, possibly unrelated, good news is that low cost index funds have appeared, in the range from 0.0 to 0.4, with no load fees.
Does the S&P 500 include dividends re-invested?

Or is there an accumulation index (dividends re-invested) to benchmark against?

gerrym51
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Re: "My guy always beats the market"

Post by gerrym51 » Fri May 31, 2013 5:40 pm

It's just like going to the casino and bragging you won. you never come back and brag the times you lost.

German Expat
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Re: "My guy always beats the market"

Post by German Expat » Fri May 31, 2013 5:54 pm

Depends on the population you pick. I would say from my small sample size (management of the company I work for) about 50% give me that line. I just ignore it and let them be happy. At least nobody tried to hook me up with their adviser yet.

allsop
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Re: "My guy always beats the market"

Post by allsop » Sat Jun 01, 2013 7:27 am

Redstorm wrote:
allsop wrote:
barnaclebob wrote:We've all heard people say this while we try our best not to roll our eyes and hold our lips tight. I heard a coworker say this about their Edward Jones adviser and had visions of him throwing 5% of his money into a burning trash can every time he makes a deposit. It prompted me to wonder how many people think they or their advisers "always beat the market" but I couldn't find any good articles or research. Does anyone know of any?
Is the "adviser" beating the market before or after dividends? Even the most inept manager can beat that.

A few years ago several Swedish banks that have a major part of the mutual fund business used indices ex dividends as their benchmarks and after a "PBS" report highlighting this the reporting was changed.

Other, possibly unrelated, good news is that low cost index funds have appeared, in the range from 0.0 to 0.4, with no load fees.
Does the S&P 500 include dividends re-invested?

Or is there an accumulation index (dividends re-invested) to benchmark against?
From http://en.wikipedia.org/wiki/S%26P_500 :

"The "S&P 500", generally quoted, is a price return index; there are also "total return" and "net total return" versions of the index. These versions differ in how dividends are accounted for. The price return version does not account for dividends; it only captures the changes in the prices of the index components. The total return version reflects the effects of dividend reinvestment. Finally, the net total return version reflects the effects of dividend reinvestment after the deduction of withholding tax"

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