All my friends are outperforming index funds

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ValuationsMatter
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Re: All my friends are outperforming index funds

Post by ValuationsMatter »

DaftInvestor wrote: Wed May 06, 2020 9:59 am All of my friends beat the market too - at least that's what they claim if it comes up in conversation (with some selective stock picks).

It reminds me of driving abilities - do you think you are an above-average driver? Of course you do!
Ninety percent of drivers think they are better than the average driver. :sharebeer
The definition is left to the one being questioned. I am above average on a race track. I am below average if you quantify based on number of traffic infractions. How will I answer? Above, of course.
tibbitts
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Re: All my friends are outperforming index funds

Post by tibbitts »

Haeysh wrote: Wed May 06, 2020 8:51 am Hope your friend also times his selling correctly. It’s all just noise until you cash out 🙂 I trust the index will be in a better spot 30 years from now then any specific stock.
Why would you make the statement that "I trust the index will be in a better spot 30 years from now then any specific stock", when you know that won't be the case? Sometimes index advocates are their own worst enemies.
core4portfolio
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Re: All my friends are outperforming index funds

Post by core4portfolio »

I was doing this when i have only 10k but as i contribute more and when its 100k its really challenging to pick only winners
On a long run, there is a lot of chances of failure to beat market.
Also, you need to know about those companies and follow them to make decisions.
If you have good time then you do and there is a possibility of beating market.
I have 8% in individual stocks and they are doing good now but not sure on long term. I just bet on 8%
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner
Call_Me_Op
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Re: All my friends are outperforming index funds

Post by Call_Me_Op »

justsomeguy2018 wrote: Wed May 06, 2020 9:54 am
Call_Me_Op wrote: Wed May 06, 2020 6:50 am
justsomeguy2018 wrote: Tue May 05, 2020 12:53 am I keep trying to convince my friends about the value of low-cost index investing. For the most part they are not really financially savvy and rarely even invest at all. But what little investing they have done the past 3 months has outperformed the market. This from people who know almost nothing about investing or financial statements. Sometimes makes me wonder if I am going about it wrong.

Is the benefit of index funding really only realized over really long periods of time?
You're not serious, are you? The (broad US stock) market has lost 14% in the past 3 months. Investing in cash under the mattress would have beat stock index funds by a large margin. Do you think cash under the mattress is a good long-term investing strategy?
The broad US stock market is composed of individual stocks (some of which were bought by my friends) that are outperforming the overall broad US market.... likewise the broad US market is also outperforming vs some areas (airline stocks e.g.)
OK, in that case it was dumb luck on their part.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
protagonist
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Re: All my friends are outperforming index funds

Post by protagonist »

justsomeguy2018 wrote: Tue May 05, 2020 12:53 am I keep trying to convince my friends about the value of low-cost index investing. For the most part they are not really financially savvy and rarely even invest at all. But what little investing they have done the past 3 months has outperformed the market.
How many friends are we talking about?

Even if the calculations are all correct and they are beating the market, it would not at all be unusual for a few people to be lucky or clever enough to beat the market over a three month period.

If you are talking about a large number of people I would be very suspect.
rbaldini
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Re: All my friends are outperforming index funds

Post by rbaldini »

protagonist wrote: Wed May 06, 2020 12:10 pm How many friends are we talking about?

Even if the calculations are all correct and they are beating the market, it would not at all be unusual for a few people to be lucky or clever enough to beat the market over a three month period.

If you are talking about a large number of people I would be very suspect.
What we're trying to say is... maybe you need more friends.
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Cubicle
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Re: All my friends are outperforming index funds

Post by Cubicle »

My 0.2% "high yield" checking account has squahsed my equity holdings going back several years at this point. This doesn't mean we should dump all our money into checking accounts.

You can make anything better or worse than another by slicing time periods. Or over any time, you can find a holding that did better or worse than anything else.
"Oh look another bajillion point declin-Ooooh!!! A coupon for pizza!!!!" <--- This is what everyone's IPS should be. ✓✓✓
zorgs10
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Re: All my friends are outperforming index funds

Post by zorgs10 »

This thread reminds me of the closing words from A Prairie Home Companion:
Lake Wobegon, where all the women are strong, all the men are good-looking, and all the investors beat the index.
StealthRabbit
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Re: All my friends are outperforming index funds

Post by StealthRabbit »

justsomeguy2018 wrote: Tue May 05, 2020 1:04 am
dru808 wrote: Tue May 05, 2020 12:57 am Let’s see how they’re doing in 2 years. It’s not impossible to beat the market, just highly unlikely over an extended period of time.


How do you know they’re beating the market? They tell you they invested money in a high flyer? If they beat the market and threw down $500 this year, I’m not impressed.
I know what they bought and when they bought it so I OCD keep tabs on it....was hoping to use it as a lesson to stick to index funds! Making me feel foolish.
Your friends could easily have beaten the market BIG time in the last 3 months by staying in a 0.02% Passbook savings acct. :mrgreen:

Wise investors (?) :moneybag
DonIce
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Re: All my friends are outperforming index funds

Post by DonIce »

Just go 100% Amazon starting in 1997. You would have gotten more than 100x better return than the index.
denovo
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Re: All my friends are outperforming index funds

Post by denovo »

justsomeguy2018 wrote: Tue May 05, 2020 12:53 am I keep trying to convince my friends about the value of low-cost index investing. For the most part they are not really financially savvy and rarely even invest at all. But what little investing they have done the past 3 months has outperformed the market. This from people who know almost nothing about investing or financial statements. Sometimes makes me wonder if I am going about it wrong.

Is the benefit of index funding really only realized over really long periods of time?

Your friends aren't telling the truth.
"Don't trust everything you read on the Internet"- Abraham Lincoln
Chuck107
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Re: All my friends are outperforming index funds

Post by Chuck107 »

.....
Last edited by Chuck107 on Mon Oct 05, 2020 6:42 am, edited 1 time in total.
Alas, I find moderation of this forum too restrictive for my tastes, farewell.
Gufomel
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Re: All my friends are outperforming index funds

Post by Gufomel »

tibbitts wrote: Wed May 06, 2020 10:27 am
Haeysh wrote: Wed May 06, 2020 8:51 am Hope your friend also times his selling correctly. It’s all just noise until you cash out 🙂 I trust the index will be in a better spot 30 years from now then any specific stock.
Why would you make the statement that "I trust the index will be in a better spot 30 years from now then any specific stock", when you know that won't be the case? Sometimes index advocates are their own worst enemies.
I think he means that he has more faith that the index will outperform any one specific stock (or small selection of stocks) that he would choose to pick. That’s one of the foundations of Bogleheads.

I think you might have taken him to mean that no individual stocks will outperform the index, which would obviously be incorrect. But picking ahead of time the individual stocks that outperform the index is the difficulty, and why most Bogleheads steer clear of it.
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justsomeguy2018
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Re: All my friends are outperforming index funds

Post by justsomeguy2018 »

So a lot of these points I did make with them (have to be right twice, good luck consistently beating over long period of time, cherry picking time periods can manipulate results), I just found it odd that all 3 of them had investments that were outperforming an index fund (and no, they are not lying to me). Sort of made me wonder if it was easier to beat index investing than thought. Maybe Cramer is right that investing in the index in a downturn is not as good a strategy as individual stocks?
Jags4186
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Re: All my friends are outperforming index funds

Post by Jags4186 »

justsomeguy2018 wrote: Thu May 07, 2020 9:55 am So a lot of these points I did make with them (have to be right twice, good luck consistently beating over long period of time, cherry picking time periods can manipulate results), I just found it odd that all 3 of them had investments that were outperforming an index fund (and no, they are not lying to me). Sort of made me wonder if it was easier to beat index investing than thought. Maybe Cramer is right that investing in the index in a downturn is not as good a strategy as individual stocks?

It’s really simple to outperform the market. Just buy the stocks going up and avoid or short the stocks going down.

It’s also really simple to put a colony on Mars. Just put all the supplies and people in a spaceship and send them there.

Simple =/= easy.

Although, I will admit, it’s a lot easier to randomly pick a few stocks and beat the market than it is to build a colony on Mars :wink:

If I were you I would focus less on what your friends are doing and more on what you are doing.
core4portfolio
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Re: All my friends are outperforming index funds

Post by core4portfolio »

justsomeguy2018 wrote: Thu May 07, 2020 9:55 am Maybe Cramer is right that investing in the index in a downturn is not as good a strategy as individual stocks?
In my individual holdings, most of them beat index way ahead until Feb 20. From feb 20 to March 20, all of them lost more than index and went to negative and even worse than index but they came back now. However there are chance it might lost forever also.
For example, uber, lyft are still 50% down where as index is not.

I was big holder of a software service stock which lost only 16% or so in 2008 and holded for long time.
In the past 10 years, it lag the index and last 3 year was worst than index. At this moment, VTI index leads way ahead now.
I cashed out luckily on its current spike just before Feb 20 and moved to XLK. While VTI went 3 years back, that individual stock went back to
value in 2012 :( .

I also have SHOP which is very small part of my portfolio which beat index nicely as of now as i bought on 334, 434 price for just 4 stocks. Issue with individual stock is we dont know when to get out.
Allocation : 80/20 (80% TSM, 20% TBM) | Need to learn fishing sooner
whereskyle
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Re: All my friends are outperforming index funds

Post by whereskyle »

core4portfolio wrote: Thu May 07, 2020 10:10 am
justsomeguy2018 wrote: Thu May 07, 2020 9:55 am Maybe Cramer is right that investing in the index in a downturn is not as good a strategy as individual stocks?
In my individual holdings, most of them beat index way ahead until Feb 20. From feb 20 to March 20, all of them lost more than index and went to negative and even worse than index but they came back now. However there are chance it might lost forever also.
For example, uber, lyft are still 50% down where as index is not.

I was big holder of a software service stock which lost only 16% or so in 2008 and holded for long time.
In the past 10 years, it lag the index and last 3 year was worst than index. At this moment, VTI index leads way ahead now.
I cashed out luckily on its current spike just before Feb 20 and moved to XLK. While VTI went 3 years back, that individual stock went back to
value in 2012 :( .

I also have SHOP which is very small part of my portfolio which beat index nicely as of now as i bought on 334, 434 price for just 4 stocks. Issue with individual stock is we dont know when to get out.
Last sentence is gold. If you think you know (or your friends think they know) when to exit positions, then you all can be my guest.

OP, if you haven't yet, you should read Bogle's Little Book of Common Sense Investing. I think it will do a better job than the forum of explaining why 3 months of outperformance is meaningless if you plan to invest for a lifetime, and it will also explain why entering and exiting positions for thirty years is much more likely to result in financial ruin than it is a wealthy and comfortable retirement.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle
bgf
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Re: All my friends are outperforming index funds

Post by bgf »

My friends just went to Vegas and won a bunch of money at the slot machines.

They must be really talented at pulling those levers.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
RomeoMustDie
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Re: All my friends are outperforming index funds

Post by RomeoMustDie »

I called the cruise line spike before it happened and investors here made fun of it.

I would own your investment decisions without worshipping people as investment gurus.

Nobody knows nuthin' even bogleheads.
rockstar
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Re: All my friends are outperforming index funds

Post by rockstar »

RomeoMustDie wrote: Thu May 07, 2020 10:33 am I called the cruise line spike before it happened and investors here made fun of it.

I would own your investment decisions without worshipping people as investment gurus.

Nobody knows nuthin' even bogleheads.
This.

We all make mistakes.
lws
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Re: All my friends are outperforming index funds

Post by lws »

Over a long period of time the market will win.
Monsterflockster
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Re: All my friends are outperforming index funds

Post by Monsterflockster »

justsomeguy2018 wrote: Tue May 05, 2020 12:53 am I keep trying to convince my friends about the value of low-cost index investing. For the most part they are not really financially savvy and rarely even invest at all. But what little investing they have done the past 3 months has outperformed the market. This from people who know almost nothing about investing or financial statements. Sometimes makes me wonder if I am going about it wrong.

Is the benefit of index funding really only realized over really long periods of time?
They went all in on Amazon, Microsoft, Apple and Costo?
FireProof
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Re: All my friends are outperforming index funds

Post by FireProof »

As long as you are fully invested in any particular play, you are about as likely as not to beat the market, certainly over a single market cycle, which can last years (e.g. a good run for growth stocks, or small cap, or tech). The real danger is when people try to beat the market by timing it. First, they are often not fully invested, and miss out on a lot of appreciation. Second, buying high and selling low has a strange fascination for the average retail investor - they see a hot stock and want to jump on it before it's too late, while when they see part of their portfolio lagging that of their friend's portfolio, they want to ditch it. A monkey stockpicker will perform about as well as an index. Most of the bad rap of non-index funds is because of the unwarranted claims that are made (that expected return will be greater), simplicity (why add useless complexity), and the financial and mathematical illiteracy of the average person (in practice, most are much worse than a monkey).
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