Trying to beat the market

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Taylor Larimore
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Trying to beat the market

Post by Taylor Larimore » Fri Oct 07, 2016 9:31 am

Bogleheads:

Every year naive and greedy investors are lured into exotic funds and ETFs believing they have found a way to "beat the market." To see what can happen, these are the 10 worst Year-to-Date ETFs*:

Ticker.....................Fund..........................................YTD Return
VXX ......iPath S&P 500 VIX Short-Term Futures ETN.................-55.7%
VIIX ......VelocityShares Daily Long VIX Short-Term ETF,,,,,,,,.....-55.6
VIXY......ProShares VIX Short-Term Futures ETF......................-55.5
KWT......VanEck Vectors Solar Energy ETF.............................-35.4
TAN.......Guggenheim Solar ETF.........................................-34.9
NGE.......Global X MSCI Nigeria ETF.................................... -33.3
GAZ.......iPath Bloomberg Natural Gas Subindex Total Return ETN-26.4
DXJF......WisdomTree Japan Hedged Financials Fund................-24.2
CNXT......VanEck Vectors ChinaAMC SME-ChiNext ETF...............-23.1
WEAT.....Teucrium Wheat Fund..........................................-22.2

VTSAX....Vanguard Total Stock Market Index Fund.................+8.2%

* Source: ETF.com & Morningstar

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

Random Walker
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Re: Trying to beat the market

Post by Random Walker » Fri Oct 07, 2016 9:36 am

That's a great list! :-) excellent reminder that one of the best advantages of index investing is elimination of the risk of underperformance.

Dave

Engineer250
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Re: Trying to beat the market

Post by Engineer250 » Fri Oct 07, 2016 10:26 am

Some of these funds have really high expense ratios too, just in case the poor performance wasn't enough by itself.
Where the tides of fortune take us, no man can know.

juliewongferra
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Re: Trying to beat the market

Post by juliewongferra » Fri Oct 07, 2016 11:20 am

What would really be interesting is to see how the top 10 market-beating funds fared in the following year...that would *really* prove that seeking long-term outperformance via active management is a fool's game. (I don't doubt it, just devising proofs for those who might.)

cheers!
jwf
If you aren't familiar with Mr. Bogle and his investment philosophy, then you don't know Jack!

ShenziNation

Re: Trying to beat the market

Post by ShenziNation » Fri Oct 07, 2016 11:21 am

Great post. Just a story to share:

Wife: My cousin in the UK claims that he is up 22% YTD. We (in the US) should think about investing, and GBP is low so we'll get more for our USD.
Me: What does he invest in? Stocks, GILTS, Index funds, commodities, currencies? Does he day-trade, swing-trade, short/long-term positions? Are those gains realized or unrealized?
Wife: I don't know, I'll ask.
Me: How much are costs? Commissions, fees, etc? ER on the funds? What if they are 15%? Then it's only 7% net. He's a market timer. Studies and statistics show that the odds are against him. Go read Malkiel's Random Walk. Or listen to it, I have the mp3 audio book on the computer.
Wife: Yes, but is it better than zero.
Me: Then why don't you keep the funds in the US, in USD? VTSAX is up 8% YTD.
Wife: (speechless)
Me: (mental victory dance)

silverskates
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Re: Trying to beat the market

Post by silverskates » Fri Oct 07, 2016 11:52 am

Taylor Larimore wrote:Bogleheads:

Every year naive and greedy investors are lured into exotic funds and ETFs believing they have found a way to "beat the market." To see what can happen, these are the 10 worst Year-to-Date ETFs*:

Ticker.....................Fund..........................................YTD Return
VXX ......iPath S&P 500 VIX Short-Term Futures ETN.................-55.7%
VIIX ......VelocityShares Daily Long VIX Short-Term ETF,,,,,,,,.....-55.6
VIXY......ProShares VIX Short-Term Futures ETF......................-55.5
KWT......VanEck Vectors Solar Energy ETF.............................-35.4
TAN.......Guggenheim Solar ETF.........................................-34.9
NGE.......Global X MSCI Nigeria ETF.................................... -33.3
GAZ.......iPath Bloomberg Natural Gas Subindex Total Return ETN-26.4
DXJF......WisdomTree Japan Hedged Financials Fund................-24.2
CNXT......VanEck Vectors ChinaAMC SME-ChiNext ETF...............-23.1
WEAT.....Teucrium Wheat Fund..........................................-22.2

VTSAX....Vanguard Total Stock Market Index Fund.................+8.2%

* Source: ETF.com & Morningstar

Best wishes.
Taylor
Thanks for posting, Taylor! This is just another reminder of why we left our salesman this spring. We fell into the naive investor category. Our salesman put us in actively managed funds (later to find out they were exotic funds), charged us 2%/year and lost 22% of my Roth IRA and some cash in 2015 after only being in the fund for 6 months. He has since moved his clients to another actively managed fund with the same company and that fund is down 12% already this year. I enjoy watching its performance because I know we're no longer in it and it's just a good reminder that we're in the best place for us now. 3 fund portfolio, index funds, low cost! Finding this forum has been a financial lifesaver for us!

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cinghiale
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Re: Trying to beat the market

Post by cinghiale » Fri Oct 07, 2016 1:31 pm

Taylor wrote:
Bogleheads:

Every year naive and greedy investors are lured into exotic funds and ETFs believing they have found a way to "beat the market." To see what can happen, these are the 10 worst Year-to-Date ETFs*:
Ticker.....................Fund..........................................YTD Return
VXX ......iPath S&P 500 VIX Short-Term Futures ETN.................-55.7%
VIIX ......VelocityShares Daily Long VIX Short-Term ETF,,,,,,,,.....-55.6
VIXY......ProShares VIX Short-Term Futures ETF......................-55.5
KWT......VanEck Vectors Solar Energy ETF.............................-35.4
TAN.......Guggenheim Solar ETF.........................................-34.9
NGE.......Global X MSCI Nigeria ETF.................................... -33.3
GAZ.......iPath Bloomberg Natural Gas Subindex Total Return ETN-26.4
DXJF......WisdomTree Japan Hedged Financials Fund................-24.2
CNXT......VanEck Vectors ChinaAMC SME-ChiNext ETF...............-23.1
WEAT.....Teucrium Wheat Fund..........................................-22.2
I could not help but notice that this parade of horribles captures almost every category of investment where you can get in on "the next big thing." Look at:

Market Direction: VXX
Trading Intensity: VIIX and VIXY
Sector: KWT and TAN
Commodity: GAZ and WEAT
Country: CNXT and NGE
Country and sector!: DXJF

This list would not be quite so impressive if it was loaded with just one sector or strategy (all short funds or natural resource funds, for example). But here, the love is spread all around!! So many ways to crash and burn.

A cautionary note here: I cannot, you cannot, the newsletter to which you subscribe cannot, and your finanical advisor cannot pick the next big stock, move in direction, sector, country, fund manager, fund, or any combination of the aforementioned.
"We don't see things as they are; we see them as we are." Anais Nin | | "Sometimes the first duty of intelligent men is the restatement of the obvious." George Orwell

joebh
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Re: Trying to beat the market

Post by joebh » Fri Oct 07, 2016 1:34 pm

Taylor Larimore wrote:Every year naive and greedy investors are lured into exotic funds and ETFs believing they have found a way to "beat the market." To see what can happen, these are the 10 worst Year-to-Date ETFs*:
To be more balanced about "what can happen" wouldn't it make sense to also publish the 10 *best* Year-to-Date ETFs?

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Taylor Larimore
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Consequences and Probabilities

Post by Taylor Larimore » Fri Oct 07, 2016 2:00 pm

joebh wrote:
Taylor Larimore wrote:Every year naive and greedy investors are lured into exotic funds and ETFs believing they have found a way to "beat the market." To see what can happen, these are the 10 worst Year-to-Date ETFs*:
To be more balanced about "what can happen" wouldn't it make sense to also publish the 10 *best* Year-to-Date ETFs?
Joe:

Barry Banitz sent me these top Year-to-Date Funds:
Direxion Daily Brazil Bull 3X ETF (BRZU) 231.04
Direxion Daily Jr Gld Mnrs Bull 3X ETF (JNUG) 219.81
ProShares Ultra Junior Miners (GDJJ) 189.92
PureFunds™ ISE Junior Silver ETF (SILJ) 163.40
ProShares Ultra MSCI Brazil Capped (UBR) 151.63
Direxion Daily Gold Miners Bull 3X ETF (NUGT) 140.94
ProShares Ultra Gold Miners (GDXX) 124.77
iShares MSCI Global Silver Miners (SLVP) 118.11
Global X Silver Miners ETF (SIL) 108.37
Global X Gold Explorers ETF (GOEX) 100.18
VanEck Vectors Coal ETF (KOL) 96.64
Direxion Daily Latin America Bull 3X ETF (LBJ) 95.83
VanEck Vectors Junior Gold Miners ETF (GDXJ) 95.00
Direxion Daily Semicondct Bull 3X ETF (SOXL) 81.81
ALPS Sprott Junior Gold Miners ETF (SGDJ) 80.94
iShares MSCI Brazil Small-Cap (EWZS) 78.50
iShares MSCI Global Gold Miners (RING) 77.30
Global X Brazil Consumer ETF (BRAQ) 73.25
SPDR® S&P Metals and Mining ETFs 72.64
iShares MSCI Brazil Capped (EWZ) 71.19
* A 50% loss requires a 100% gain to be even.
* Consequences are more important than Probabilities.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

selters
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Re: Trying to beat the market

Post by selters » Fri Oct 07, 2016 2:52 pm

bad78andy wrote:Great post. Just a story to share:

Wife: My cousin in the UK claims that he is up 22% YTD.
GBP is down about 22% YTD. So that's no big achievment.

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LAlearning
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Re: Trying to beat the market

Post by LAlearning » Fri Oct 07, 2016 3:13 pm

What the WEAT?!
I know nothing!

boglephreak
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Re: Trying to beat the market

Post by boglephreak » Fri Oct 07, 2016 3:17 pm

i went to etf.com to see the source. it says this:
Rather than ignoring those ETFs, perhaps investors should take a look at closer look at them to see if there are any opportunities available at discount prices.

After all, past performance isn't necessarily indicative of future performance, and this year's losers could turn out to be next year's winners.
didnt bother reading the rest of the article, but its here:

http://www.etf.com/sections/features-an ... tfs-year-0

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Re: Trying to beat the market

Post by Tamalak » Fri Oct 07, 2016 3:23 pm

Looks like the best managed ETF did much better than the worst one did bad (even accounting for -50% = +100%). I wonder what would happen if I invested in all of them at once. Is there an passive index for active management? :mrgreen:

joebh
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Re: Consequences and Probabilities

Post by joebh » Sat Oct 08, 2016 2:33 pm

Taylor Larimore wrote: Barry Banitz sent me these top Year-to-Date Funds:
Direxion Daily Brazil Bull 3X ETF (BRZU) 231.04
Direxion Daily Jr Gld Mnrs Bull 3X ETF (JNUG) 219.81
ProShares Ultra Junior Miners (GDJJ) 189.92
PureFunds™ ISE Junior Silver ETF (SILJ) 163.40
ProShares Ultra MSCI Brazil Capped (UBR) 151.63
Direxion Daily Gold Miners Bull 3X ETF (NUGT) 140.94
ProShares Ultra Gold Miners (GDXX) 124.77
iShares MSCI Global Silver Miners (SLVP) 118.11
Global X Silver Miners ETF (SIL) 108.37
Global X Gold Explorers ETF (GOEX) 100.18
VanEck Vectors Coal ETF (KOL) 96.64
Direxion Daily Latin America Bull 3X ETF (LBJ) 95.83
VanEck Vectors Junior Gold Miners ETF (GDXJ) 95.00
Direxion Daily Semicondct Bull 3X ETF (SOXL) 81.81
ALPS Sprott Junior Gold Miners ETF (SGDJ) 80.94
iShares MSCI Brazil Small-Cap (EWZS) 78.50
iShares MSCI Global Gold Miners (RING) 77.30
Global X Brazil Consumer ETF (BRAQ) 73.25
SPDR® S&P Metals and Mining ETFs 72.64
iShares MSCI Brazil Capped (EWZ) 71.19
* A 50% loss requires a 100% gain to be even.
* Consequences are more important than Probabilities.

Best wishes.
Taylor
Thanks.

I completely understand how foolish it is to attempt to beat the market by choosing such "exotic" ETFs.

But I think it's a weak argument to say "look how these poor-performing ETFs are doing YTD". Highlighting YTD performance simply invites the "Oh yeah, what about these top YTD ETFs?" And that gets you nowhere.

You'd be better off pointing out that last year's winners are likely to be this year's losers. That's a much stronger argument, IHMO.

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investorguy1
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Re: Trying to beat the market

Post by investorguy1 » Sat Oct 08, 2016 8:00 pm

YTD everything is up US, Int'l, US Bonds, Int'l bonds, broad basket commodities, TIPS, gold. Maybe thats why some of those funds have high fees it takes some serious skill to find something that lost so much money.

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Re: Trying to beat the market

Post by Tanelorn » Sun Oct 09, 2016 7:30 am

Taylor Larimore wrote:Bogleheads:

Every year naive and greedy investors are lured into exotic funds and ETFs believing they have found a way to "beat the market." To see what can happen, these are the 10 worst Year-to-Date ETFs*:

Ticker.....................Fund..........................................YTD Return
VXX ......iPath S&P 500 VIX Short-Term Futures ETN.................-55.7%
VIIX ......VelocityShares Daily Long VIX Short-Term ETF,,,,,,,,.....-55.6
VIXY......ProShares VIX Short-Term Futures ETF......................-55.5
KWT......VanEck Vectors Solar Energy ETF.............................-35.4
TAN.......Guggenheim Solar ETF.........................................-34.9
NGE.......Global X MSCI Nigeria ETF.................................... -33.3
GAZ.......iPath Bloomberg Natural Gas Subindex Total Return ETN-26.4
DXJF......WisdomTree Japan Hedged Financials Fund................-24.2
CNXT......VanEck Vectors ChinaAMC SME-ChiNext ETF...............-23.1
WEAT.....Teucrium Wheat Fund..........................................-22.2

VTSAX....Vanguard Total Stock Market Index Fund.................+8.2%

* Source: ETF.com & Morningstar

Best wishes.
Taylor
I'm not sure that's entirely the right conclusion. Most of these are stock ETFs (vs commodity funds or ETNs, which can be more complicated and conflicted), and in general an ETF is a passively managed index tracker for whatever odd subset of the world's stocks they decide to focus on. For example, the solar energy ETFs lost money because solar energy stocks had a bad year, or Nigerian ones likewise.

This is really no different that saying some stocks go up and some go down and it's hard to know which in advance. I'm sure you pay 1% for most of these in ER, but a -50% isn't from the costs and for non-active ETFs (which is the vast vast majority of them, new pending proposals with the SEC notwithstanding) it isn't from bad active stock picking. It's just bad luck and betting on a small number of similar stocks exposes you to a lot more luck, which could be good or could be bad. Stripping out the leveraged funds from the top performers list, there are still things that will have outperformed the general stock market by a large margin and those are no better to buy than these were to avoid (gold miners, brazillian stocks, etc).

mmcmonster
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Re: Consequences and Probabilities

Post by mmcmonster » Sun Oct 09, 2016 10:35 am

Taylor Larimore wrote:Barry Banitz sent me these top Year-to-Date Funds:
Direxion Daily Brazil Bull 3X ETF (BRZU) 231.04

[...]

* A 50% loss requires a 100% gain to be even.
* Consequences are more important than Probabilities.

Best wishes.
Taylor
Even with it's dramatic uptick this year, BRZU (#1 on your list) is down 90% from inception (April 2013). A cautionary tale at the least.

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Re: Consequences and Probabilities

Post by inbox788 » Sun Oct 09, 2016 6:44 pm

Taylor Larimore wrote:
joebh wrote:To be more balanced about "what can happen" wouldn't it make sense to also publish the 10 *best* Year-to-Date ETFs?
Joe:

Barry Banitz sent me these top Year-to-Date Funds:
Direxion Daily Brazil Bull 3X ETF (BRZU) 231.04
Direxion Daily Jr Gld Mnrs Bull 3X ETF (JNUG) 219.81
...
* A 50% loss requires a 100% gain to be even.
* Consequences are more important than Probabilities.

Best wishes.
Taylor
I couldn't get a graph of BRZS the inverse of BRZU, but here's one of JDST vs JNUG:

https://ca.finance.yahoo.com/q/bc?t=1y& ... =JNUG&ql=1

Most of these amped up ETFs have an inverse that does mostly the opposite. You just need to be smart enough or lucky enough to pick the right one going the right direction. Pretty much a flip of a coin IMO.
joebh wrote:You'd be better off pointing out that last year's winners are likely to be this year's losers. That's a much stronger argument, IHMO.
I think there's a reversion towards the mean, but I think there's also a bit of momentum as well. So, I think some of last years winners will be this year's losers, but some will continue to outperform the average.
I'm sure it's full of flaws and controversies, but here's a pro momentum blog argument:
http://www.quant-investing.com/blogs/ge ... g-squashed
Last edited by inbox788 on Sun Oct 09, 2016 6:54 pm, edited 1 time in total.

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ThereAreNoGurus
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Re: Trying to beat the market

Post by ThereAreNoGurus » Sun Oct 09, 2016 6:53 pm

But I think it's a weak argument to say "look how these poor-performing ETFs are doing YTD". Highlighting YTD performance simply invites the "Oh yeah, what about these top YTD ETFs?" And that gets you nowhere.

You'd be better off pointing out that last year's winners are likely to be this year's losers. That's a much stronger argument, IHMO.
Better yet let's see the list of funds that beat the S&P 500 over a 30 year period... bet it's a very small list. :wink:

Get so tired of reading claims that it's "easy" to beat the market. Lots of "research"... mostly noise consisting of smoke and fizzle.
Trade the news and you will lose.

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