Author Topic: Passive investors need to roll up their sleeves and get stuck in  (Read 6630 times)

frugledoc

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http://www.telegraph.co.uk/business/2016/03/05/passive-investors-need-to-roll-up-their-sleeves-and-get-stuck-in/

Maybe I'm biased but I thought this article was ridiculous from start to finish. 

My favourite bit

"The first approach is to tilt the overall angle of your returns upwards by picking winners and avoiding losers. By definition, active investment does not always get it right. It may even be a zero-sum game. But if the alternative is to travel sideways, I would suggest that we donít have any alternative. "

It's that easy!
« Last Edit: March 06, 2016, 12:46:16 PM by frugledoc »

maizeman

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #1 on: March 05, 2016, 03:51:46 PM »
The first approach is to tilt the overall angle of your returns upwards by picking winners and avoiding losers.

*writing note to self* Buy stocks that are about to go up, sell stocks that are about to go down.

I'll get right on that, thanks!

steveo

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #2 on: March 05, 2016, 04:33:27 PM »
The first approach is to tilt the overall angle of your returns upwards by picking winners and avoiding losers.

*writing note to self* Buy stocks that are about to go up, sell stocks that are about to go down.

I'll get right on that, thanks!

Me too.

sol

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #3 on: March 05, 2016, 04:41:10 PM »
The first approach is to tilt the overall angle of your returns upwards by picking winners and avoiding losers.

*writing note to self* Buy stocks that are about to go up, sell stocks that are about to go down.

I'll get right on that, thanks!

Me too.

Not me, I'm buying stocks that are about to go down AND ones that are about to go up.

steveo

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #4 on: March 05, 2016, 06:57:12 PM »
The first approach is to tilt the overall angle of your returns upwards by picking winners and avoiding losers.

*writing note to self* Buy stocks that are about to go up, sell stocks that are about to go down.

I'll get right on that, thanks!

Me too.

Not me, I'm buying stocks that are about to go down AND ones that are about to go up.

Interesting idea. Let me know how you go.

FiveSigmas

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #5 on: March 05, 2016, 08:13:19 PM »
The first approach is to tilt the overall angle of your returns upwards by picking winners and avoiding losers.

*writing note to self* Buy stocks that are about to go up, sell stocks that are about to go down.

I'll get right on that, thanks!

Me too.

Not me, I'm buying stocks that are about to go down AND ones that are about to go up.

Interesting idea. Let me know how you go.

My guess is he'll follow a path something like this.

SwordGuy

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #6 on: March 05, 2016, 10:04:54 PM »
Isn't the overall US market now 25% over the 2000 high mark?

Seppia

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #7 on: March 05, 2016, 10:33:11 PM »
Probably not if you account for inflation

Heckler

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #8 on: March 05, 2016, 10:51:53 PM »
FTSE 100 is just 100 UK companies.  If I was passively invested in just that, I'd agree I'm in trouble.
« Last Edit: March 05, 2016, 10:54:07 PM by Heckler »

sol

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #9 on: March 05, 2016, 11:07:34 PM »
Not me, I'm buying stocks that are about to go down AND ones that are about to go up.

Interesting idea. Let me know how you go.

I predict that I will get exactly average market returns, minus the tiniest expense ratio I can find.

Thus far, my prediction has been correct every single year!

steveo

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #10 on: March 05, 2016, 11:26:40 PM »
Not me, I'm buying stocks that are about to go down AND ones that are about to go up.

Interesting idea. Let me know how you go.

I predict that I will get exactly average market returns, minus the tiniest expense ratio I can find.

Thus far, my prediction has been correct every single year!

And over time you will probably beat the best hedge fund managers and self-anointed gurus.

maizeman

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #11 on: March 06, 2016, 08:52:57 AM »
I predict that I will get exactly average market returns, minus the tiniest expense ratio I can find.

Thus far, my prediction has been correct every single year!

And over time you will probably beat the best hedge fund managers and self-anointed gurus.

Backtesting the article's strategy of buying companies that will go up in the next year while selling companies that will go down in the next year suggests it would've actually outperformed market indexes in every single year. ;-)

steveo

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #12 on: March 06, 2016, 12:42:16 PM »
I predict that I will get exactly average market returns, minus the tiniest expense ratio I can find.

Thus far, my prediction has been correct every single year!

And over time you will probably beat the best hedge fund managers and self-anointed gurus.

Backtesting the article's strategy of buying companies that will go up in the next year while selling companies that will go down in the next year suggests it would've actually outperformed market indexes in every single year. ;-)

Amazing. Can you let me know which companies are going to fit into each category. Personally I have problems predicting the future but if someone can help me out.

maizeman

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #13 on: March 06, 2016, 01:29:57 PM »
I was going to write this response: It's simple, for my backtesting, in 1960 I just look up which stocks will have the biggest gain in 1961 and which ones will have the greatest decline and so on.

But we may be running into a Poe's Law issue here. What can I say that would be ridiculous enough that it would be obvious the previous post was supposed to be funny, not a serious argument for an investment strategy.

Anyway, any joke that has to be explained isn't a very funny one. Sorry steveo. --MM

thd7t

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #14 on: March 06, 2016, 01:43:03 PM »
Not me, I'm buying stocks that are about to go down AND ones that are about to go up.

Interesting idea. Let me know how you go.

I predict that I will get exactly average market returns, minus the tiniest expense ratio I can find.

Thus far, my prediction has been correct every single year!
If that's what you are doing, why don't you just buy everything!

sol

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #15 on: March 06, 2016, 02:35:28 PM »
If that's what you are doing, why don't you just buy everything!

Yes, that was the joke.  I'm a die-hard indexer.  I do buy everything, every week.

steveo

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #16 on: March 06, 2016, 11:12:08 PM »
I was going to write this response: It's simple, for my backtesting, in 1960 I just look up which stocks will have the biggest gain in 1961 and which ones will have the greatest decline and so on.

But we may be running into a Poe's Law issue here. What can I say that would be ridiculous enough that it would be obvious the previous post was supposed to be funny, not a serious argument for an investment strategy.

Anyway, any joke that has to be explained isn't a very funny one. Sorry steveo. --MM

I thought it was funny from the start but I initially read Sol stating he would buy the losing stocks and sell the winning stocks. That is about what I expected from Sol.

thd7t

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #17 on: March 07, 2016, 07:18:23 AM »
If that's what you are doing, why don't you just buy everything!

Yes, that was the joke.  I'm a die-hard indexer.  I do buy everything, every week.
I thought that my italics made it clear that I got the joke.  I was foiled by the internet, though.  I buy everything, too, but it's every month (although I'm about to change to buying everything every two weeks)

Metric Mouse

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #18 on: March 08, 2016, 02:00:27 AM »
Not me, I'm buying stocks that are about to go down AND ones that are about to go up.

Interesting idea. Let me know how you go.

I predict that I will get exactly average market returns, minus the tiniest expense ratio I can find.

Thus far, my prediction has been correct every single year!

And over time you will probably beat the best hedge fund managers and self-anointed gurus.

Unlikely...

But there is a high probably that strategy will beat the worst managers, and many self-anointed gurus...

Wolf359

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #19 on: March 08, 2016, 10:00:42 AM »
So an investment director at Fidelity International who sells lucrative actively managed funds thinks that the current market environment calls for using active fund managers.  Hmm.  What an unexpected recommendation!

mizzourah2006

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #20 on: March 08, 2016, 10:26:54 AM »
FTSE 100 is just 100 UK companies.  If I was passively invested in just that, I'd agree I'm in trouble.

The top 100 companies in the S&P 500 account for 65% of the portfolio and the top 200 companies account for 81% of the portfolio, so you aren't too far off.

Kaspian

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Re: Passive investors need to roll up their sleeves and get stuck in
« Reply #21 on: March 08, 2016, 01:36:22 PM »
The very definition of passive investing involves a "set it and forget it" approach and tinkering as little as possible.  The whole "tilting" and evaluating thing isn't part of it.  Also, the author's comments about the FTSE 100 does not account for diversity and the occasional rebalance.  Is he saying passive must become active in order to see future returns?  Thanks but no thanks there, Fidelity International boy!  Your credentials say indexing is against your company's best interest.  Right?  ...Right?  :)

http://www.fidelityinternational.com/middle-east/news-insight/expert-opinion/tom-stevenson/default.page

I have NO IDEA why respectable newspapers let employees of investment firms write finance articles for their readers.  In Canada we now have real estate agents writing and giving advice on the state of the housing markets.  Giving over the hen houses to the foxes is easier (and cheaper?) than paying real journalists, I guess?