Saving for a rainy day is for suckers.And this from the it's an incredibly small world department; the guy whom I believe to be the head ETF honcho at State Street (I won't publish is name in case that is not kosher) was on my Babe Ruth baseball team 30 years ago and my Pop Warner football team before that.
His older brother actually coached the baseball team we were on together.
I've seen this guy once or twice before but never put it together until today.
We chatted for a few minutes in between sessions. Incredibly small world.
9 comments:
Roger,
I know these places in the photos are pretty swanky, but how do you know that these people are not living below their means?????
Have you considered legally changing your name to "Diversification"? (OK I have been drinking tonight :)
i wasn't trying to imply they weren't just that aspiring to such largesse is so out of reach for most people especially me.
Hey,l Who gave you permission to take a pic in front of my group home?
Roger,
Just curious how your presentation went today on sector investing?
who gave me permission? you did, lol
Roger- Since you are at an ETF conference what are your views on this recent quote by Swensen.... in today's WSJ referring the other institutions who use hedge funds and active management the following was quoted by Swensen:
Swensen: "A lot of institutions think they are emulating Yale, but they are not. Most endowments use fund of funds and consultants, rather than making their own well-informed decisions. You can divide institutional investors into two camps: those who can hire high-quality, active-management investors and those who cannot. If your going to invest in alternatives, you should be all in, and do it they way Yale does it - with 20 to 25 investment professionals who devote their careers to looking for opportunities. Or you belong in the other end, with a portfolio exclusively in index funds with low fees. If your not going to put together a team that can make high-quality decisions, your best alternative is passive investing. With a casual attempt to beat the market, you're going to fail".
Here we have one of the most informed investors in the country telling the WSJ that most billion dollar institutions do not have the resources to devote to finding a few talented active managers and that they should stick with index funds. Consequently, it is unimaginable that an individual investor or financial consultant would have the resources or skill to pick winning managers.
Swensen: "Consultants make money by giving advice to as many people as possible. But you outperform by finding inefficiencies most of the market has not yet uncovered. So consultants end up ultimately doing a disservice to investors."
Or you could simply look at as one of the best paid most talked about investors bragging that it's his way or the highway.
Are there more than a couple of years performance data available on Swenson?
Anonymous 9:07
Buy-and-hold/Index funds are a form of buy-high/sell-low style.
To clarify, if you buy $100 of a stock that is priced at $100 then your risk/reward is 1% per 1% move in stock price. If that stock doubles to $200 then a 1% move in stock price has a 2% risk/reward relative to your original $100 investment. A similar situation exists to the downside, if the stock price declines to $50 then a 1% move in stock price has a 0.5% risk/reward relative to the original investment.
That variable risk can be mitigated by adding more risk (buying more stock) as prices decline, reducing risk/stock as prices rise. Such rebalancing can be performed using fixed interval reviews or be more dynamic based upon predictions or measures.
Where buy-low/sell-high rebalancing adds value (stock price volatility capture benefits) then that reduces the loading upon the total fund to achieve comparable (or better) results than buy-and-hold.
If for example bonds average 7%, stocks 10% and 1% rebalance benefit is achieved then an average 66/34 stock/bond blend will compare equally with pure 100% stock buy-and-hold (60/40 type stock bond blends are popular for good reason). Should the rebalance benefit amount to 2% then an average 34/66 stock/bond blend will compare to buy-and-hold. Alternatively if a 2% rebalance benefit is achieved and a greater proportion of stock than 34/66 stock/bond blend is averaged then returns might be expected to better buy-and-hold. Yet such a stock/bond blending might be expected to carry lower levels of volatility (risk) than that of pure 100% stock buy-and-hold.
I’m no expert, yet personally I target and generally achieve around a 3% rebalance benefit. I would expect pro’s to be more than capable of achieving better.
A characteristic of such a blend based style is that shorter term (yearly) performance tends to be up less in an up year, down less in a down year. Such shorter term comparisons are often (wrongly) used to highlight how the majority of managed funds relatively under-perform buy-and-hold. A fairer measure would be to compare longer term net compound average returns achieved over a range of market cycles.
Regards. Clive.
anon 9:07, interesting excerpt I'll think about answer and post it later in the week.
Post a Comment