gmaynardkrebs wrote: ↑Sat Jul 21, 2018 9:38 pm
staythecourse wrote: ↑Sat Jul 21, 2018 8:27 am
InvestInPasta wrote: ↑Sat Jul 21, 2018 7:19 am
asif408 wrote: ↑Fri Jul 20, 2018 8:26 am
So what is the point of your post? You say their forecasts are worse than the toss of a coin. One was, one wasn't. I'm not sure what you are trying to prove.
Is there any actionable item from your post?
No there isn't, this thread is just food for thought.
Anyway I appreciated your post, I'm surprised they got one forecast right. I didn't know.
Well I think it is QUITE actionable. The moral of the story is NOT to jump all over GMO and Mr. Granthem, but to reinforce for those who need it (and based on posts I see everyday on this site folks still need it) that active management is a losers game.
Good luck.
What I see every day is the belief that passive management is some sort of panacea. It is not, unless you believe being down 40% when your active friends are down 42% is some sort of consolation. If passive investing helps you sleep better at night, who am I to say otherwise, but it doesn't solve the "big one."
The idea of passive investing is based on the literature. If you believe in active management it is reasonable to assume the better you are the more money you will attract, no? So if that is true then why did the BHB and BSB studies show the top 100 pension funds drew NEGATIVE returns based on their active management? So either you believe your skill is greater then those active managers (I doubt), you think the methodology is incorrect in those studies (no evidence put out thus far on that one), or somehow it is different now (no evidence on that one). Heck the data is pretty consistent way back to Jensen article in the early 1930's.
The point being active management is overall a losers game as the majority. Are there that destroy the passive investor. Absolute. Just let me know how to identify them in advance so I can avoid the MAJORITY of losers. Looking at dollar weighted retuns vs. time weighted it seems many of these funds that do outperform are done when they are small and worse do poor going forward when they start attracting money due to being successful.
In your example, I don't care what active management performs in up OR down years. Heck, I don't care what my passive investment are doing in an up OR down year. All I care about is if my fund choices are doing what they are supposed to be doing and that is tracking the benchmark with the least amount of frictional cost (ER, turnover, etc..).
The question with active management is you may end up having MANY under performing years for no reason due to the addition an uncompensated manager risk. Passive investing eliminates that. Passive investing is a way of eliminating an uncompensated risk factor and that is manager risk.
Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” |
-Jack Bogle