Active investing: simple but hard.

[milesdividendmd]

It is statistically very difficult to beat the market before costs, and almost insurmountably difficult to do so after costs.

 So the smart money is obviously to invest passively and low-cost index funds.

That's clear.

But there are market anomalies that are robust and exploitable (value and momentum chief among them,) which is also clear.

If you try to exploit these anomalies you will probably fail, but it is not impossible to do so. After all smart people have done so for long time periods and in a statistically significant manner.

This article was a really nice discussion about some specifics of why Active investing success is both possible and extremely difficult to achieve.

http://blog.alphaarchitect.com/2015/08/17/the-sustainable-active-investing-framework-simple-but-not-easy/

[brooklynguy]

This reminded me of a thread about a study which showed that highly-ranked stock-picking ideas in an online investment club outperformed low-ranked stock-picking ideas, but I can't recall all the details and now I can't find the study.

I found the thread using a google search, but it appears to be gone from the forum (though the full text must exist somewhere in the ether of the internet, because snippets of it show up in the Google search page preview).  This was the thread:

http://forum.mrmoneymustache.com/investor-alley/can't-beat-an-index/85/?wap2

When I take the link, I get a message that "The topic or board you are looking for appears to be either missing or off limits to you," which is quite distressing.  Does this mean the OP deleted the thread?  There was some great discussion in it. 

Does anyone happen to remember that study and know where to find it?

(Sorry to hijack this thread, Miles - the Alpha Architect article was a good read; thanks for sharing it.)

[milesdividendmd]

Brooklyn,

I think this happens when mods freeze the threads. IMO it's always sad to see interesting info thrown out because of its close proximity to trolling or bad content.

Another reason to always advocate against censorship.  it may seem innocuous at the time, but it has unintended consequences