Larry Swedroe: What Returns Can Teach

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Random Walker
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Larry Swedroe: What Returns Can Teach

Post by Random Walker » Wed May 23, 2018 8:43 am

http://www.etf.com/sections/index-inves ... -can-teach

Larry reviews a study showing that investors are getting wiser over the last 25 years. As a group we chase returns much less in the past and focus on costs more. It seems though, we’ve replaced chasing returns with chasing alpha. Investors may have learned just enough to be dangerous. I could well be guilty of this!

Dave

dcabler
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Re: Larry Swedroe: What Returns Can Teach

Post by dcabler » Wed May 23, 2018 8:54 am

I wonder what the age breakdown looks like over that period. Could it be that the investors are getting older and wiser? :D

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Reb Tevye
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Re: Larry Swedroe: What Returns Can Teach

Post by Reb Tevye » Wed May 23, 2018 9:15 am

I’m chasing an alpha of zero, after taxes and fees.
"So, what would have been so terrible if I had a small fortune?"

Random Walker
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Re: Larry Swedroe: What Returns Can Teach

Post by Random Walker » Wed May 23, 2018 9:21 am

Reb Tevye wrote:
Wed May 23, 2018 9:15 am
I’m chasing an alpha of zero, after taxes and fees.
That’s a good point. An investor truly tracking a benchmark should be perturbed by both negative and positive tracking error.

Dave

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nisiprius
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Re: Larry Swedroe: What Returns Can Teach

Post by nisiprius » Wed May 23, 2018 1:21 pm

Reb Tevye wrote:
Wed May 23, 2018 9:15 am
I’m chasing an alpha of zero, after taxes and fees.
Indeed. The last sentence in the article quotes the authors as saying "They know that alpha is important, but cannot effectively capture it.”

Why is alpha important?

Persistent alpha would be important. If, as the authors say, it is "negatively autocorrelated," that seems to confirm that it is unimportant. Unless we start chasing our tail in the old infinite regress.

1) I can pick stocks.

2) OK, I can't pick stocks--but I can pick fund managers who can pick stocks.

2) OK, I can't pick stocks and I can't pick fund managers--but I can pick advisors who can pick fund managers who can pick stocks...
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

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Reb Tevye
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Re: Larry Swedroe: What Returns Can Teach

Post by Reb Tevye » Wed May 23, 2018 5:20 pm

3a) I can pick robots that can pick ETFs that can track non-overlapping collections of stocks?
"So, what would have been so terrible if I had a small fortune?"

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oldcomputerguy
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Re: Larry Swedroe: What Returns Can Teach

Post by oldcomputerguy » Wed May 23, 2018 6:19 pm

nisiprius wrote:
Wed May 23, 2018 1:21 pm
2) OK, I can't pick stocks and I can't pick fund managers--but I can pick advisors who can pick fund managers who can pick stocks...
Yep, just what we need; more Helpers. (With a hat tip to Mr. Bogle...)
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

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