Outperforming The Stock Market Long Term!

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invt
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Outperforming The Stock Market Long Term!

Post by invt »

Simple question: How can I outperform the stock market over the long-term?
Marseille07
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Re: Outperforming The Stock Market Long Term!

Post by Marseille07 »

By simply holding something like UPRO.

*Assuming the markets go up*, you'll come out ahead of 1x US TSM.
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

Marseille07 wrote: Fri Sep 17, 2021 12:57 pm By simply holding something like UPRO.

*Assuming the markets go up*, you'll come out ahead of 1x US TSM.
citation needed
Marseille07
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Re: Outperforming The Stock Market Long Term!

Post by Marseille07 »

invt wrote: Fri Sep 17, 2021 12:58 pm
Marseille07 wrote: Fri Sep 17, 2021 12:57 pm By simply holding something like UPRO.

*Assuming the markets go up*, you'll come out ahead of 1x US TSM.
citation needed
Just run your own sims on PV.
magicrat
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Re: Outperforming The Stock Market Long Term!

Post by magicrat »

by getting lucky
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

Marseille07 wrote: Fri Sep 17, 2021 12:59 pm
Just run your own sims on PV.
You can't run daily rebalanced simulations on PV.
dbr
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Re: Outperforming The Stock Market Long Term!

Post by dbr »

According to the Fama-French three factor model a portfolio tilted to small cap and value stocks has a higher expected return than the cap weighted total stock market. You could therefore concentrate your holdings in small cap and value stocks.

A question is whether or not F-F, demonstrated for historical experience, is still valid for future experience. Such a strategy also requires understanding that predicting a higher expected return does not predict a higher actual return.

There are additional factor theories and models.

Is this the kind of thing you want?
jarjarM
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Re: Outperforming The Stock Market Long Term!

Post by jarjarM »

invt wrote: Fri Sep 17, 2021 1:00 pm
Marseille07 wrote: Fri Sep 17, 2021 12:59 pm
Just run your own sims on PV.
You can't run daily rebalanced simulations on PV.
But you can build your own model on python. In any case, here is the research paper on this.

https://papers.ssrn.com/sol3/papers.cfm ... id=2741701
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

dbr wrote: Fri Sep 17, 2021 1:02 pm According to the Fama-French three factor model a portfolio tilted to small cap and value stocks has a higher expected return than the cap weighted total stock market. You could therefore concentrate your holdings in small cap and value stocks.

A question is whether or not F-F, demonstrated for historical experience, is still valid for future experience. Such a strategy also requires understanding that predicting a higher expected return does not predict a higher actual return.

There are additional factor theories and models.

Is this the kind of thing you want?
Yeah, I think this factor investing thing has been kind of oversold. The premiums are just wayyy smaller out of sample.

The DFA Small Cap Value fund couldn't meaningfully separate itself from the US market over the past 26 years.

https://www.portfoliovisualizer.com/bac ... ion1_1=100

And that's before taking into account the high taxes caused by higher dividends plus much higher turnover.
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Re: Outperforming The Stock Market Long Term!

Post by DB2 »

UPRO would have been down about -140% in 2008 correct?

Down -270% during the Great Depression?

UPRO is not meant to buy and hold forever. It's a trading tool for short-term set-ups, day(s) trade, etc. It can fairly easily go to zero in a bad downturn.
Last edited by DB2 on Fri Sep 17, 2021 1:10 pm, edited 3 times in total.
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Re: Outperforming The Stock Market Long Term!

Post by ApeAttack »

invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
Guaranteed outperformance, or just any idea that might work?
May all your index funds gain +0.5% today.
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

jarjarM wrote: Fri Sep 17, 2021 1:03 pm But you can build your own model on python. In any case, here is the research paper on this.

https://papers.ssrn.com/sol3/papers.cfm ... id=2741701
The data says it didn't work particularly well in the past.

viewtopic.php?p=4426328#p4426328
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Re: Outperforming The Stock Market Long Term!

Post by nisiprius »

Marseille07 wrote: Fri Sep 17, 2021 12:59 pm
invt wrote: Fri Sep 17, 2021 12:58 pm
Marseille07 wrote: Fri Sep 17, 2021 12:57 pm By simply holding something like UPRO.

*Assuming the markets go up*, you'll come out ahead of 1x US TSM.
citation needed
Just run your own sims on PV.
So I did.

If you invested $10,000 each into VTI (1X US Total Stock Market) (blue), and UPRO (red), at the end of the year you'd have had $12,301 in VTI, but only $11,008 in UPRO.

Even more interesting, on October 31st, you'd have have made +$234 on your investment in VTI, but you would have lost -$2,674 in UPRO.

Source

Image

UPRO hasn't lasted for "the long term" yet, but ULPIX, a 2X daily-leveraged S&P 500 fund has. I have to admit that since inception, a period of over twenty years, ULPIX (blue) failed to beat the Vanguard Total Stock Market Index Fund (red).

Source

Image
Last edited by nisiprius on Fri Sep 17, 2021 2:19 pm, edited 3 times in total.
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jarjarM
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Re: Outperforming The Stock Market Long Term!

Post by jarjarM »

invt wrote: Fri Sep 17, 2021 1:08 pm
jarjarM wrote: Fri Sep 17, 2021 1:03 pm But you can build your own model on python. In any case, here is the research paper on this.

https://papers.ssrn.com/sol3/papers.cfm ... id=2741701
The data says it didn't work particularly well in the past.

viewtopic.php?p=4426328#p4426328
Since you're on the HFEA thread, then you should understand the premise of that strategy. The consideration is mainly on interest rate and possibility of stagflation. There's no free lunch, every path has risk. You'll have to decide if the risk is worth for the potential reward.
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Re: Outperforming The Stock Market Long Term!

Post by invt »

jarjarM wrote: Fri Sep 17, 2021 1:13 pm
Since you're on the HFEA thread, then you should understand the premise of that strategy. The consideration is mainly on interest rate and possibility of stagflation. There's no free lunch, every path has risk. You'll have to decide if the risk is worth for the potential reward.
Choosing to ignore high interest rate times is like choosing to believe there are only bull markets.
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Re: Outperforming The Stock Market Long Term!

Post by nisiprius »

Simple Boglehead answer:
  • I don't know how.
  • I know that I can do well enough if I simply tie the stock market long term.
  • I know how to do that. I can do it, at least within a few basis points, and anybody can. I do it simply by buying and holding a total stock market index fund for the long term. So that is what I do.
Last edited by nisiprius on Fri Sep 17, 2021 1:18 pm, edited 1 time in total.
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

nisiprius wrote: Fri Sep 17, 2021 1:15 pm Simple Boglehead answer:
  • I don't know how.
  • I know that I can do well enough if I simply tie the stock market long term.
  • I know how to do that. I can do it, at least within a few basis points, and anybody can. I do it simply by buying and holding a total stock market index fund for the long term. So that is what I recommend.
Simple. Elegant. Clean. :sharebeer
jarjarM
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Re: Outperforming The Stock Market Long Term!

Post by jarjarM »

invt wrote: Fri Sep 17, 2021 1:14 pm
jarjarM wrote: Fri Sep 17, 2021 1:13 pm
Since you're on the HFEA thread, then you should understand the premise of that strategy. The consideration is mainly on interest rate and possibility of stagflation. There's no free lunch, every path has risk. You'll have to decide if the risk is worth for the potential reward.
Choosing to ignore high interest rate times is like choosing to believe there are only bull markets.
Predicting interest rate direction is about as hard as predicting stock movement. And yes, interest rate can stay low for extended period of time, look around the world. Again, every path has its own unique risk. If you want to out perform the marker long term, the best way is to take additional risk, either via leverage, concentrated bet, or the likes. If there's truly a way to out perform the market without additional risk, it would've been arbitrage away from billions of dollars investment by hedge and the likes.
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Re: Outperforming The Stock Market Long Term!

Post by alex_686 »

I used to do performance attribution and analytics.

Outperforming in the short run takes skill and luck. It may require taking on more risk.

There is something called "secular periods". A market tends to have certain characteristics. Then the market will move to a new secular period with new characteristics. What was a winning strategy in the old period tends to be a losing strategy in the new period.

The structure of the market keeps on changing. As you allude to, small cap value is a example. At one time is outperformed but maybe not anymore. I have got theories on why. The point is what works in one period does not in the next. So you have to keep on finding the next new thing before anybody else does.

BTW, UPRO and leverage is not the way to go. And running simulations on prior history is not going to help. You need to keep your dates and data within a secular period. Now that you have your model you need to figure out what the parameters are for the current period. Leveraged portfolios outperform when volatility is low but fail when it is high. Then you need to avoid the crashes and managed the change in secular periods.
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Re: Outperforming The Stock Market Long Term!

Post by invt »

jarjarM wrote: Fri Sep 17, 2021 1:19 pm
Predicting interest rate direction is about as hard as predicting stock movement.
Exactly. So the premise of HFEA just seems broken. The whole idea is that we will predict that we won't return to a high interest rate environment so that leveraged stocks/bonds will work well.
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Re: Outperforming The Stock Market Long Term!

Post by Jags4186 »

You can outperform the stock market long term by opening up an SP500 fund and selling it on the broader market with an expense ratio more than the cost to run the fund. That way, you can capture all of the market gains plus fees from others.

There is no free lunch. The way to outperform the market long term is to take on additional risk. Of course, that does not guarantee you’ll outperform the market, since risk is a two way street.
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Re: Outperforming The Stock Market Long Term!

Post by invt »

alex_686 wrote: Fri Sep 17, 2021 1:19 pm
The structure of the market keeps on changing. As you allude to, small cap value is a example. At one time is outperformed but maybe not anymore. I have got theories on why. The point is what works in one period does not in the next. So you have to keep on finding the next new thing before anybody else does.
Curious to hear your theories. What happened to the small cap value "risk" factors?
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Re: Outperforming The Stock Market Long Term!

Post by Taylor Larimore »

invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
invt:

The same way you can beat the casino -- by luck -- but the chances are you will lose.

Read what experts say about Total Market Index Funds (the casino):

viewtopic.php?f=10&t=156579

Best Wishes
Taylor
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Re: Outperforming The Stock Market Long Term!

Post by alex_686 »

invt wrote: Fri Sep 17, 2021 1:27 pm Curious to hear your theories. What happened to the small cap value "risk" factors?
Was there every a small cap value risk factor? Maybe yes, maybe no. The evidence here is debatable. I have read lots of papers arguing in both directions.

So let us rewind a bit. What was the world like when Farma and French published.

Nobody thought about small cap value. A overlooked gem. That is not longer true.

Information to make informed judgements on small companies were hard. A few number of analysis combing through paper fillings. Now lots of analysis with big computers examining every details. I mean, there are firms out there that buy 10% of all credit card transactions to tease out financial health.

Small firms grow up to be big firms, big firms suffer from diseconomies of scale. Thanks to the information revolution that is no longer true. No diseconomies of scale. And big firms can exploit networking effects to generate higher profits then their smaller brethren.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
blueberrypi
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Re: Outperforming The Stock Market Long Term!

Post by blueberrypi »

Take more risk, concentrate your holdings, or add leverage.
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Re: Outperforming The Stock Market Long Term!

Post by invt »

alex_686 wrote: Fri Sep 17, 2021 1:35 pm
Was there every a small cap value risk factor? Maybe yes, maybe no. The evidence here is debatable. I have read lots of papers arguing in both directions.

So let us rewind a bit. What was the world like when Farma and French published.

Nobody thought about small cap value. A overlooked gem. That is not longer true.

Information to make informed judgements on small companies were hard. A few number of analysis combing through paper fillings. Now lots of analysis with big computers examining every details. I mean, there are firms out there that buy 10% of all credit card transactions to tease out financial health.

Small firms grow up to be big firms, big firms suffer from diseconomies of scale. Thanks to the information revolution that is no longer true. No diseconomies of scale. And big firms can exploit networking effects to generate higher profits then their smaller brethren.
What do you think about the argument that small cap value funds exhibit higher volatility + drawdown, so a "risk" premium should be warranted?

BTW, I agree that the premiums will be much smaller going forward, even if they persist, and am skeptical whether they make a meaningful difference after costs and taxes.
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Re: Outperforming The Stock Market Long Term!

Post by arcticpineapplecorp. »

invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
why do you need to beat the market?

if you need to beat the market you're either probably not saving enough or trying to retire too soon.

the long term return of the market was 10.1% since 1926.

why do you need to earn more than that?

To beat the market you'd have to take more risk than the market.

Most people can't even handle the risk of the market, but somehow they think they can accept higher risk than the market.

that's quite a conundrum.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: Outperforming The Stock Market Long Term!

Post by invt »

arcticpineapplecorp. wrote: Fri Sep 17, 2021 1:41 pm why do you need to beat the market?

if you need to beat the market you're either probably not saving enough or trying to retire too soon.

the long term return of the market was 10.1% since 1926.

why do you need to earn more than that?

To beat the market you'd have to take more risk than the market.

Most people can't even handle the risk of the market, but somehow they think they can accept higher risk than the market.

that's quite a conundrum.
I live in a country with a good social safety net. I don't need anything. :beer

It's just an intellectual exercise. :sharebeer
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Re: Outperforming The Stock Market Long Term!

Post by AlohaBill »

Rather than trying to outperform the market long term, why don’t you spend thought on increasing your savings ?
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Re: Outperforming The Stock Market Long Term!

Post by alex_686 »

invt wrote: Fri Sep 17, 2021 1:38 pm What do you think about the argument that small cap value funds exhibit higher volatility + drawdown, so a "risk" premium should be warranted?
Maybe. It is a valid theory and line of reasoning. It depends on which data set and time period you are looking at. So it is there but the conclusions are not robust nor stable.

A particular issues are bankruptcies and other high impact events. i.e., tail risk. The problem is trying to estimate how big that tail risk is. Not enough data points and is unstable over time.

Higher volatility might be caused by low liquidity and high spreads.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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arcticpineapplecorp.
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Re: Outperforming The Stock Market Long Term!

Post by arcticpineapplecorp. »

invt wrote: Fri Sep 17, 2021 1:43 pm
arcticpineapplecorp. wrote: Fri Sep 17, 2021 1:41 pm why do you need to beat the market?

if you need to beat the market you're either probably not saving enough or trying to retire too soon.

the long term return of the market was 10.1% since 1926.

why do you need to earn more than that?

To beat the market you'd have to take more risk than the market.

Most people can't even handle the risk of the market, but somehow they think they can accept higher risk than the market.

that's quite a conundrum.
I live in a country with a good social safety net. I don't need anything. :beer

It's just an intellectual exercise. :sharebeer
here's the intellectual argument. It requires always remembering the fundamental rule of investing: risk and return are inextricably linked.

If there was a known way to beat the market (guaranteed. that's what you're asking us to tell you), there would be no risk.

if there is no risk (because the method was a guaranteed way to beat the market) there would be no return.

Why would you expect market beating returns for a strategy that supposedly would be known how to do that guaranteed?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: Outperforming The Stock Market Long Term!

Post by batangueno »

Simple question: How can I outperform the stock market over the long-term?
I had a similar question recently. I asked how I can do an all-out performance chasing. I received a lot of good advices and tips. In the end, I decided to play a small ‘horse race’ using fractional shares at Fidelity. I bought $30 each of VUG, VOO, VTI, MGK, VGT, QQQ, IHI, and TECL. VTI would be the Stock Market horse. Just small amounts I used so it would not hurt my tiny pocket. I bought at market price one at a time. I just wanted to see how they will perform in the long run (at least a year).

I just started, but so far it is IHI in the lead with a gain of 76 cents. Bringing up the rear is TECL with a loss of $1.35. The standing is as follows: IHI, VUG, VOO, VTI, MGK, QQQ, VGT, and TECL. It is still so early in the race and the market is on a recent downturn, but I would like to see how things are a year from now.

:happy
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Re: Outperforming The Stock Market Long Term!

Post by arcticpineapplecorp. »

batangueno wrote: Fri Sep 17, 2021 1:49 pm
Simple question: How can I outperform the stock market over the long-term?
I had a similar question recently. I asked how I can do an all-out performance chasing. I received a lot of good advices and tips. In the end, I decided to play a small ‘horse race’ using fractional shares at Fidelity. I bought $30 each of VUG, VOO, VTI, MGK, VGT, QQQ, IHI, and TECL. VTI would be the Stock Market horse. Just small amounts I used so it would not hurt my tiny pocket. I bought at market price one at a time. I just wanted to see how they will perform in the long run (at least a year).

I just started, but so far it is IHI in the lead with a gain of 76 cents. Bringing up the rear is TECL with a loss of $1.35. The standing is as follows: IHI, VUG, VOO, VTI, MGK, QQQ, VGT, and TECL. It is still so early in the race and the market is on a recent downturn, but I would like to see how things are a year from now.

:happy
but what would one learn from such an exercise?

If it works out well:
1. you're a brilliant stock picker?
2. you just got lucky? Keep trying and you'll lose more than win?
3. anything is possible over the short term, but the long term is what matters. So unless you've won enough to stop playing the game, the long term will not likely play out favorably.

A one year track record does not a market beater make.

years ago the market fell 10%. My mom's portfolio only fell 3%. Why? She only had 30% in stocks (the rest was fixed income). My mom will always beat the market whenever the market tanks (she will do worse than the market when it rises).
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

alex_686 wrote: Fri Sep 17, 2021 1:47 pm
invt wrote: Fri Sep 17, 2021 1:38 pm What do you think about the argument that small cap value funds exhibit higher volatility + drawdown, so a "risk" premium should be warranted?
Maybe. It is a valid theory and line of reasoning. It depends on which data set and time period you are looking at. So it is there but the conclusions are not robust nor stable.

A particular issues are bankruptcies and other high impact events. i.e., tail risk. The problem is trying to estimate how big that tail risk is. Not enough data points and is unstable over time.

Higher volatility might be caused by low liquidity and high spreads.
Yeah, I agree. The other problem is that there are a thousand different ways to go about it, and you are back to choosing an "active" stock picking strategy.

At least with low-cost market cap weighted funds, you know they aren't going to be "invalidated" by new findings a few years from now.
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Re: Outperforming The Stock Market Long Term!

Post by dbr »

arcticpineapplecorp. wrote: Fri Sep 17, 2021 1:48 pm
invt wrote: Fri Sep 17, 2021 1:43 pm
arcticpineapplecorp. wrote: Fri Sep 17, 2021 1:41 pm why do you need to beat the market?

if you need to beat the market you're either probably not saving enough or trying to retire too soon.

the long term return of the market was 10.1% since 1926.

why do you need to earn more than that?

To beat the market you'd have to take more risk than the market.

Most people can't even handle the risk of the market, but somehow they think they can accept higher risk than the market.

that's quite a conundrum.
I live in a country with a good social safety net. I don't need anything. :beer

It's just an intellectual exercise. :sharebeer
here's the intellectual argument. It requires always remembering the fundamental rule of investing: risk and return are inextricably linked.

If there was a known way to beat the market (guaranteed. that's what you're asking us to tell you), there would be no risk.

if there is no risk (because the method was a guaranteed way to beat the market) there would be no return.

Why would you expect market beating returns for a strategy that supposedly would be known how to do that guaranteed?
So the question is whether the question is getting higher expected return with higher risk or the question is actually obtaining higher return predictably all the time. For example if F-F is really still valid then you do get higher expected return, but it may be at higher risk. An example where one gets higher return all the time is comparing a cheap index fund to an expensive one tracking the same index.
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Re: Outperforming The Stock Market Long Term!

Post by deltaneutral83 »

It's pretty easy, it's called market timing. Just figure out which day the market is going to lose 2% and move to cash the day before and then get back the day of the bloodbath (mutual funds) . You will be the king of Wall St if you can do this for even 3 years in a row.
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Re: Outperforming The Stock Market Long Term!

Post by dbr »

arcticpineapplecorp. wrote: Fri Sep 17, 2021 1:54 pm

If it works out well:
1. you're a brilliant stock picker?
2. you just got lucky? Keep trying and you'll lose more than win?
3. anything is possible over the short term, but the long term is what matters. So unless you've won enough to stop playing the game, the long term will not likely play out favorably.

For which of those possibilities is Warren Buffett an exemplar? Or is Buffett something different altogether?
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Re: Outperforming The Stock Market Long Term!

Post by skierincolorado »

DB2 wrote: Fri Sep 17, 2021 1:06 pm UPRO would have been down about -140% in 2008 correct?

Down -270% during the Great Depression?

UPRO is not meant to buy and hold forever. It's a trading tool for short-term set-ups, day(s) trade, etc. It can fairly easily go to zero in a bad downturn.
Your math is wrong. Upro was not around the. But sso was and its 2x. It was not down even close to 100% because it daily rebalances. Less than 80% down in March 2009 and way up now compared to spy. Go through the math. Also volatility decay is not nearly as big a deal as some say. In theory volatility decay should not exist because it could be arbitraged away. In practice there was some volatility decay 2000-present. In theory these leveraged funds should return very close to their gearing ratio times spy returns. Over a long enough period in an efficient market. There’s a thread on this.
Last edited by skierincolorado on Fri Sep 17, 2021 2:02 pm, edited 1 time in total.
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

dbr wrote: Fri Sep 17, 2021 1:59 pm
For which of those possibilities is Warren Buffett an exemplar? Or is Buffett something different altogether?
Buying high-quality, low-volatility companies has worked well in the past.

https://papers.ssrn.com/sol3/papers.cfm ... id=3197185

Will it continue to work well in the future? Most definitely less well now that everybody knows about it.
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Re: Outperforming The Stock Market Long Term!

Post by climber2020 »

invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
Use your money to start up a business. If successful, you can make way more money off your initial investment than you ever could in the stock market. Of course, this requires a lot of work and some luck so it’s not exactly equivalent.
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

skierincolorado wrote: Fri Sep 17, 2021 2:01 pm In theory these leveraged funds should return very close to their gearing ratio times spy returns. Over a long enough period in an efficient market.
This would only be true if borrowing costs were zero. Since they aren't zero (maybe now they are, but certainly not in the past) they will perform way worse.
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Re: Outperforming The Stock Market Long Term!

Post by skierincolorado »

invt wrote: Fri Sep 17, 2021 2:04 pm
skierincolorado wrote: Fri Sep 17, 2021 2:01 pm In theory these leveraged funds should return very close to their gearing ratio times spy returns. Over a long enough period in an efficient market.
This would only be true if borrowing costs were zero. Since they aren't zero (maybe now they are, but certainly not in the past) they will perform way worse.
That’s true. There are borrowing costs. Nevertheless those are near zero now and have been low for two decades. Upro is a valid long term investment that in theory has the same sharpe ratio as spy (ignoring the higher fee)
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Re: Outperforming The Stock Market Long Term!

Post by nisiprius »

skierincolorado wrote: Fri Sep 17, 2021 2:01 pm In theory these leveraged funds should return very close to their gearing ratio times spy returns. Over a long enough period in an efficient market.
No, that is not true, because those leveraged funds don't do what you think they do. The daily rebalancing, that makes it possible to invest in them without risking a margin call, also has an important side effect: you won't get the same thing you would get investing on margin.

In UPRO's own words--not buried in the prospectus but right up there in the basic web page for UPRO:
Due to the compounding of daily returns, holding periods of greater than one day can result in returns that are significantly different than the target return and ProShares' returns over periods other than one day will likely differ in amount and possibly direction from the target return for the same period.
"Differ in amount" means "maybe much less than 2X." Differ in direction means "maybe does down when the stock market goes up."

This is absolutely fundamental.

For example, since the inception of ULPIX (blue), a 2X daily-leveraged S&P 500 fund, instead of return 2X the return of a "straight" S&P 500 fund (red), ULPIX actually returned less than the unleveraged fund.

0.94X, rather than the expected 2X.

Image

So this really happens. And it is absolutely fundamental. Unless you understand that it can happen, how it can happen, and why it can happen, you should stay strictly away from these products.

(HEDGEFUNDIE and the people in the HFEA thread do seem to understand this).
Last edited by nisiprius on Fri Sep 17, 2021 2:23 pm, edited 3 times in total.
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Re: Outperforming The Stock Market Long Term!

Post by batangueno »


but what would one learn from such an exercise?

If it works out well:
1. you're a brilliant stock picker?
2. you just got lucky? Keep trying and you'll lose more than win?
3. anything is possible over the short term, but the long term is what matters. So unless you've won enough to stop playing the game, the long term will not likely play out favorably.

A one year track record does not a market beater make.

years ago the market fell 10%. My mom's portfolio only fell 3%. Why? She only had 30% in stocks (the rest was fixed income). My mom will always beat the market whenever the market tanks (she will do worse than the market when it rises).
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events.
Top
Short answer: Nothing.

This exercise will answer a question or a curiosity in my mind. Not yours. I agree that a one year track record does not a market beater make. One year is just one lap in my horse race. This horse race can keep on going at Fidelity while I do my investing at Schwab and Ameritrade.

All of the horses in the race have a chance of beating VTI in the long term. I am curious to see which are the lucky ones. There's nothing wrong in putting a little more fun in investing.

:happy
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Re: Outperforming The Stock Market Long Term!

Post by MishkaWorries »

invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
I know how but I'm not going to tell you and everyone else for free.
We plan. G-d laughs.
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Re: Outperforming The Stock Market Long Term!

Post by invt »

MishkaWorries wrote: Fri Sep 17, 2021 2:22 pm
invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
I know how but I'm not going to tell you and everyone else for free.
Just tell me your Bitcoin address and I will make sure you get compensated. :wink:
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Re: Outperforming The Stock Market Long Term!

Post by HomerJ »

invt wrote: Fri Sep 17, 2021 1:43 pm
arcticpineapplecorp. wrote: Fri Sep 17, 2021 1:41 pm why do you need to beat the market?

if you need to beat the market you're either probably not saving enough or trying to retire too soon.

the long term return of the market was 10.1% since 1926.

why do you need to earn more than that?

To beat the market you'd have to take more risk than the market.

Most people can't even handle the risk of the market, but somehow they think they can accept higher risk than the market.

that's quite a conundrum.
I live in a country with a good social safety net. I don't need anything. :beer

It's just an intellectual exercise. :sharebeer
So you're just wasting our time.
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invt
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Re: Outperforming The Stock Market Long Term!

Post by invt »

HomerJ wrote: Fri Sep 17, 2021 2:29 pm
So you're just wasting our time.
True. There is probably nothing that can compete with holding the market in the lowest-cost manner possible.
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Re: Outperforming The Stock Market Long Term!

Post by Ed 2 »

invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
Just buy stocks that goes up
"The fund industry doesn't have a lot of heroes, but he (Bogle) is one of them," Russ Kinnel
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Re: Outperforming The Stock Market Long Term!

Post by secondopinion »

invt wrote: Fri Sep 17, 2021 12:55 pm Simple question: How can I outperform the stock market over the long-term?
Anybody could outperform the stock market over the long-term. The question is will they?

There is zero way to guarantee beating the market long-term. Although I believe there are methods that will likely beat the market long-term, they often come with a major downside risk. And I know ways that could possibly beat the market by huge margins that are very unlikely to actually do so.

I do speculate on minor amounts (generally as a hedge) where the potential return is much higher than the principal invested; but it is unlikely to happen. If I have any skill, then outperformance will happen eventually. If not, I will lose a little over time. But it is better than paying for expensive actively managed fund to try getting outperformance; at least I get to keep the "fee" to use for the speculation.
Last edited by secondopinion on Fri Sep 17, 2021 3:05 pm, edited 1 time in total.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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