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I have mostly invested in passive funds which has been the low cost mantra of many on bogleheads but beginning to question it now as the only two active funds I own have outperformed my passive even taking into account ERs.
i have always found it to be the case . if you merely follow investor money in to the largest mega funds 80% of those funds beat indexing .so odds are pretty good you will do better .
like anything ,statistics can be skewed for many reasons . i always liken investing to being mugged lol .
if i go to some of the consistently bad neighborhoods or areas with high crime my odds are pretty high i could get mugged . but if i only go to the best neighborhoods my odds drop drastically .
well with thousands of funds out there most are not bad at stock picking but the funds are small and the expense of running a mall fund is very high .so many funds right off the bat tend to under perform because they are small and expenses kill their alpha . other funds always are in the middle of the pack or below . then you have those that swing for the fences and are on top one year and the bottom the next .
but if you stick to the biggest 20% funds odds are you will do very well .morningstar found this to be very true as they crunched their fund data . .
actually jeremy has been pretty bad . i'll pass on him as a guide for anything
ny times
" As the WSJ first reported, Grantham "has been out of step with the market several times during the firm’s four decades. GMO has usually rebounded, with the 78-year-old investor earning acclaim with asset-bubble calls ahead of Wall Street busts in 2000 and 2008." However, this time a recovery may probe problematic as the firm is "going through one of its roughest periods" and as a result assets under management have tumbled to about $80 billion, according to someone close to the matter, down from a peak of $124 billion in June 2014, a drop of 35% in two and a half years. The drop in assets has forced the firm to fire about 10% of its workforce, cutting some 65 jobs, in June last year.
The reason for GMO's underperformance has been Grantham's overarching skepticism about the viability of the market rally: "Bearish about what it sees as high valuations of U.S. stocks, GMO’s flagship mutual fund, the GMO Benchmark Free Allocation fund, has largely missed out on the latest rally in U.S. stock indexes."
The skepticism means that the firm has generally underinvested at a time when all central banks have stepped in to avoid any notable market declines or corrections. According to the WSJ, GMO held about 7% of its assets in U.S. stocks as of the end of September, with 27% in cash, 16.9% in developed markets outside the U.S. and 20% in “alternative” strategies such as global “macro” investing, according to the firm. WSJ adds that GMO also had over 20% in emerging-market stocks and bonds—an investment that did nicely earlier in 2016 but has suffered in recent months following broad selloffs in credit securities.
As a result, the GMO Benchmark Free Allocation fund rose 3.4% in 2016, compared with a gain of about 5.7% for its peers, according to fund tracker Morningstar Inc., and a gain of 12% for the S&P 500, including dividends. The firm says the fund tries to beat inflation, which rose less than 2% over the past year"
Actually his 7 year forecasts have been fairly accurate. His prediction that international/EM will outperform domestic equities over he next 7 years is a pretty easy forecast.
Returns? Hah. Could be another "lost decade" for stocks, and a negative decade for bonds.
The days of just buying the index & getting rich medium-fast are gone.
reversion to the mean always happens eventually . all these excessive gains since 2008 have to simmer down and start to give back as they revert to the more typical long term averages . they have never not done this . by the end of a typical accumulation period or retirement period which span decades returns are always within 2% or so of each other.
there are now 118 30 year time frames that all reverted back to the mean within 2%. so like night follows day it has to level out .
if the first half is crappy the next half is usually above average. if we start out great , well things end up below average . at the end of the day we always end up in the same range.
the only problem is that those average returns mean little to us as individuals . it does not matter that eventually they level out in range . if you can't average at least a 2% real return the first 15 years of a 30 year retirement , 4% will not hold so that spells pay cuts and no one wants pay cuts .
so it is not returns that are the bogey man , it is the sequence of those returns .
to some extent the sequences effect you while saving too . if the greatest gains are up front when you managed to save relatively little , the effect is not as great . in the mean time if the crappy days are when your fuel tanks are full ,well that can really hurt . so sequences and your financial standing matters more than the exact returns do .
the ups and downs when you have your maximum wealth accumulated are going to give you the biggest effect . these charts about average returns over time mean very little on an individual basis.
like i say , today a mere 7% drop erases 9 years of maxing out my 401k at catchup . that same 7% drop when starting out may be a few months of contributions .
never forget up 100% year one and down 50% year two is zero gain , your balance is just what it was when you started . however if we talk average returns that is a 25% average return . you netted a 50% gain divided by the two years .
Last edited by mathjak107; 09-09-2018 at 05:12 AM..
Broad stock market I expect to be flat over the next decade. 10 years from now if I was to guess I'd say the DOW will be between 20,000 and 30,000 and the nasdaq will be between 6,000 and 10,000. I just took at 30 year chart of the major indexes, factored in what a recession would do during this time, looked at both the growth of GDP and the growth of the federal debt, and made an educated guess.
Basically the market is dead money for buy and hold index fund investors, my prediction. Keep in mind that during this period the DOW could get as high as 35,000 to 40,000 and as low as 10,000 to 15,000. I don't like that we are generating deficits of near $1T during this phase of the economic expansion. I think it's somewhat irresponsible of Trump to be doing so at this point, and do think there's going to be a big first world crisis ahead (US, Europe, etc.) about how to pay for all these social programs with more aged people and lower birth rates. Something will have to give, and that may just be really high interest rates or inflation and a flushing of the system of all the excesses and irresponsible spending. In either case when the next recession hits we will need major deficits to keep things going, think $2T per year, or we'll have a real depression, something unlike anything we've seen since 1929.
When people stop spending they tend to stop all at once... we've had a stock buyback fueled rally which will stop with higher rates or a slowdown regardless, we have record high margin debt that is another indicator, the signs just keep piling up gradually. I hope we can go for another year or two yet though, and I think we will... as long as nonfarm payrolls and other economic data is good. This extra stimulus from the tax cuts has extended the natural economic cycle and there's too much stimulus right now that's still working it's way through the system for the recession to start now... 2-3 years perhaps, then it could get ugly. I think my DOW 35K prediction is probably optimistic and the market will probably tread water for the next 2 years, or should I say I'm hoping it will. I admit, neither the technicals nor the fundamentals look very good here.
Last edited by sholomar; 09-13-2018 at 07:21 AM..
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