Author Topic: The best investors are dead, and the 2nd best...  (Read 6219 times)

Gray Peachfuzz

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The best investors are dead, and the 2nd best...
« on: June 06, 2015, 11:25:14 AM »
From the Monevator, it made me LOL out loud, Monk-style.

Fidelity released a study discussing a performance breakdown for their accounts. The clients that did the best were the ones who were dead.

The second best performing set of clients forgot they had Fidelity accounts.

It seems like a formula to beat the market is to start an account, forget about it, then die.  Your heirs will thank you and marvel at your investing prowess.


How much are you paying for that Magnificent Money Manager again (this MMM is the antithesis our own MMM)?  As the old story goes, "Where are all the customer's yachts?"

meandmyfamily

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Re: The best investors are dead, and the 2nd best...
« Reply #1 on: June 06, 2015, 03:06:34 PM »
Do you have a link to this article?

simplified

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Re: The best investors are dead, and the 2nd best...
« Reply #2 on: June 06, 2015, 07:15:22 PM »
http://www.oddballstocks.com/2015/06/why-investors-fail.html

This seems to be the original article. I couldn't find any links to the case study.

Indexer

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Re: The best investors are dead, and the 2nd best...
« Reply #3 on: June 07, 2015, 06:29:29 AM »
Buy and hold.... forever.  It works. 

The single person I know with the best returns bought stock over 20 years ago and lost the certificates.  She thought it then became worthless at that point and never looked at it again.  Then one day a year or two ago Apple called her to tell her they were doing a stock split and they wanted to know if she wanted to convert her shares to electronic format.  Then she retired.

In that case it was buy, LUCKY PICK X1,000,000, hold.

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How much are you paying for that Magnificent Money Manager again

More trades normally = lower returns.  Higher fees normally = lower returns.  Now there is one good use to a 'good' advisor(if they have very low fees); they can encourage you to keep holding even when the world is on fire.  If you already have that discipline you probably don't need one, but some people do.
« Last Edit: June 07, 2015, 06:31:25 AM by Indexer »

hodedofome

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Re: The best investors are dead, and the 2nd best...
« Reply #4 on: June 07, 2015, 07:19:41 PM »
I know a trader who once said he'd make more money by hiring a high school kid to follow his mechanical system and fire the kid if he broke the rules, than by following it himself. There's a lot of good investing methodologies out there but hardly anyone follows them, that includes buy and holders. The next 30% downturn will prove that most of this forum who talk about buy and hold index funds as the best way to make money are full of it. There are some who are disciplined but most are not.

innerscorecard

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Re: The best investors are dead, and the 2nd best...
« Reply #5 on: June 07, 2015, 08:17:37 PM »
I know a trader who once said he'd make more money by hiring a high school kid to follow his mechanical system and fire the kid if he broke the rules, than by following it himself. There's a lot of good investing methodologies out there but hardly anyone follows them, that includes buy and holders. The next 30% downturn will prove that most of this forum who talk about buy and hold index funds as the best way to make money are full of it. There are some who are disciplined but most are not.

I completely agree. As I said on Twitter, the more and more I read of this increasingly popular financial independence movement, the more and more I see people who exhibit no critical thinking but are just doing what seems to work for others. They don't know why buy-and-hold works, they just "know" they will perpetually get 4%. Most will sell when things get bad.

After all, a lot of people were talking about retiring early during the dot-com bubble, too. How many actually did?

Bob W

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Re: The best investors are dead, and the 2nd best...
« Reply #6 on: June 07, 2015, 08:26:12 PM »
Agreed,  virtually no living person can handle buy and hold.   

mrpercentage

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Re: The best investors are dead, and the 2nd best...
« Reply #7 on: June 07, 2015, 08:58:07 PM »
Agreed,  virtually no living person can handle buy and hold.

Ha! Im trying.. Although the Great Peter Lynch is changing my mind on somethings. I do have to admit that it sucks watching one company lose 5+ % while everything else you own is gaining. I should have known from the chart that Ford will be a rough ride--best not even looked at unless a report gives me a good reason too. I watched CURE drop 10% in about 2 hrs and in a good market. That sucked, but I never intended to keep that one. Im done with leverage. Never again.

adding
5 of my positions are buy and hold. I was just thinking that I should remove them from my stock feed and set alerts on my calendar for quarterlies. Tracking stock movements everyday could be poor psychology even though its meant to improve and track progress.
« Last Edit: June 07, 2015, 09:10:38 PM by mrpercentage »

Kaspian

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Re: The best investors are dead, and the 2nd best...
« Reply #8 on: June 08, 2015, 12:38:06 PM »
The next 30% downturn will prove that most of this forum who talk about buy and hold index funds as the best way to make money are full of it. There are some who are disciplined but most are not.

I'm also really curious as to whether if the S&P continues to flounder around the way it has for the rest of this year (1.1% YTD?), who's going to bail on their 100% US equity index?  Pretty sure people will abandon ship (and tell others that was the strategy all along) if internationals or even CODs outdo.  Performance-chasing is lose/lose. It's like changing lines at a grocery store--you really can't win at that game.

nereo

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Re: The best investors are dead, and the 2nd best...
« Reply #9 on: June 08, 2015, 12:47:46 PM »

I completely agree. As I said on Twitter, the more and more I read of this increasingly popular financial independence movement, the more and more I see people who exhibit no critical thinking but are just doing what seems to work for others. They don't know why buy-and-hold works, they just "know" they will perpetually get 4%. Most will sell when things get bad.

After all, a lot of people were talking about retiring early during the dot-com bubble, too. How many actually did?

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Agreed,  virtually no living person can handle buy and hold.   
Can't say that I agree here.  SkyRefuge posted a study showing that something like 90% of all vanguard individual investors made absolutely no changes to their portfolios in 2008 & 2009.  That's exactly the camp I was in (and also in 2000) - I just kept up my monthly contributions.
I think the ones that tend to loose out are the ones that already are chasing gains.  They do ok during bull markets and then get slaughtered like pigs during the fall. 

Indexer

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Re: The best investors are dead, and the 2nd best...
« Reply #10 on: June 08, 2015, 06:13:48 PM »
Quote from: nereo
Quote
Agreed,  virtually no living person can handle buy and hold.   
Can't say that I agree here.  SkyRefuge posted a study showing that something like 90% of all vanguard individual investors made absolutely no changes to their portfolios in 2008 & 2009.  That's exactly the camp I was in (and also in 2000) - I just kept up my monthly contributions.
I think the ones that tend to loose out are the ones that already are chasing gains.  They do ok during bull markets and then get slaughtered like pigs during the fall.

I agreed with you that buy and hold is very possible.  Once you understand that everything going down in price is actually a GOOD thing when you are still accumulating you pray for bear markets.

"Please commith ol' bear market!  Bring us the low prices that grant fertility to our stock portfolios!  a'men."

More serious note.   I didn't see that study about Vanguard clients, but I have seen where VTSAX actually had higher investor returns than fund returns for awhile.  This is almost unheard of.  The only way for investors as a group to achieve higher returns than the mutual fund they are investing in is for them to buy more of the fund when the price is going down than when the price is going up.  This was because it had net inflows during the market crash. 

nereo

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Re: The best investors are dead, and the 2nd best...
« Reply #11 on: June 08, 2015, 06:23:52 PM »

More serious note.   I didn't see that study about Vanguard clients, but I have seen where VTSAX actually had higher investor returns than fund returns for awhile.  This is almost unheard of.  The only way for investors as a group to achieve higher returns than the mutual fund they are investing in is for them to buy more of the fund when the price is going down than when the price is going up.  This was because it had net inflows during the market crash.
Yeah, the study referenced showed just 8% of vanguard individual investors either completely abandoned equities or reduced their equity allocation by 10 or more points from Sept 2007 through December 2009.  A full 80% either stayed the course or increased their equity holdings.
That's the strongest argument to say, during a brutal bear market, the vast majority of index investors just don't do a damn thing
Personally, I think it's because people are busy doing other things, and once something is set up (like automatic investments) they can't be bothered to change it. 


Since it was skyrefuge that originally brought it up, here's the thread that it was discussed in (scroll to reply #30 in thread):
http://forum.mrmoneymustache.com/investor-alley/who-panics-in-a-market-downturn/msg596430/#msg596430
...credit where credit is due and all...

a1smith

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Re: The best investors are dead, and the 2nd best...
« Reply #12 on: June 08, 2015, 06:36:30 PM »
http://www.oddballstocks.com/2015/06/why-investors-fail.html

This seems to be the original article. I couldn't find any links to the case study.

Here are some earlier ones.  In the first article, the "dead investor" was a guess; it really was people who forgot they had an account that did the best.  It seems to be the original article; all others reference it.  I couldn't find links to the study either, just anecdotal evidence.

Business Insider (09/04/14) - Fidelity Reviewed Which Investors Did Best And What They Found Was Hilarious

The chart at the end of the article is great!  Asset Class Returns vs The "Average Investor"

Daily Finance (09/10/14) - The Secret to Investing Success: A Good Case of Amnesia

Value Walk (01/10/15) - Mohnish Pabrai: The Best Investors In The World Are Dead People