Bogleheads are mind-boggling sometimes.

[jacob]

To demonstrate the "hasn't been proved statistical" fallacy ... imagine that you have a jar with twenty balls in there. Each ball has a number on it and if you plot all the numbers, they will fall on a Bell curve. If you draw random balls out you will statistically conclude, based on the printed number, that performance is completely random.

However, what if I now said that the balls are colored red and green and that balls colored green have a positive mean value and the red ones have a negative mean value.

Well, if you conditioned your statistics on the ball being green, P(number|green), you will now find that green actually does lean positive.

The problem occurs when a quantitative analysis can't identify qualities (red/green) that aren't quantifiable. Scientifically speaking, you're not really proving that nobody can outperform the market. You're just showing that you haven't found a quantitative way to identify which balls are red and which are green. Yet!

[steveo73]

All three of them tend to be able to sit on large amounts of cash for extended periods when they think risk outweighs reward. They tend to buy a wide assortment of securities, not just common stocks. In short, they have large freedoms to go wherever for inefficiencies.

You will find that outperformers either close their funds quickly or get hired into private money because of the inherent limitations of managing a sizeable fund due to slippage.

There are a couple of good points here but I basically disagree that professional money managers make money based on my limited experience.

Firstly there are very few people that outperform.
Secondly the specifics that are stated as chasing inefficiencies are really hard to find and this is the key point - getting it right at the right time.

My father-in-law was hired into a private money fund by a billionaire. They lost money and the fund was closed down. On the flip side I think the billionaire was too involved and lost more money than my FIL could make. In saying all of that my FIL loses money as well and I think a key reason he is really rich is simply because he didn't spend all his money when he made it. Basically my FIL is an outperformer in that overall he has made money and I still don't really trust him to hold my money. I feel more confident trading for and investing for myself. I feel more confident simple investing predominantly in index funds and trading a bit on the side for fun. I think my fun trades can make me money but I wouldn't rely on it.

[workathome]

http://www.gurufocus.com/StockBuy.php?G ... th+Klarman

It is interesting that Klarman appears to only hold about 15% of the Baupost Group's funds in equity positions, and it appears this is true historically as well. Perhaps another reason to reconsider plans that call for putting 60-100% on a S&P500 ETF.

[bibacula]

I think that we've found one area of agreement. I'm trying not to quote anyone out of context.

Rebalanced index portfolios outperform most active investors. But there's a very very small group that outperform indexes, and have done for 10 or 20 years. Most of these people avoid the limelight and are not household names outside of the world of professional finance, but they exist (and are paid enormously as a result).

Here are two I'm familiar with ...
http://www.gurufocus.com/StockBuy.php?G ... th+Klarman
http://finance.yahoo.com/q/pm?s=FPACX+Performance (Steve Romick)

And there's of course Buffett.

Firstly there are very few people that outperform.

Because I work in a rather big bank, I can show you the opposite. When you look at their list of funds returns history, you'll note that most funds started not too long ago. That's because their policy for keeping funds open depend on their returns. If they have consistent negative returns for some time, the fund is closed. This way, one person that looks at their list of open funds will almost always see some nice returns and not too much losers. Off course they keep the lucky chimpanzees.

Conclusion: Outperforming an index, whether through luck or skill, is extremely rare.

I once read a book. Unfortunately I forget the title but it was a value investing book. Maybe it was Security Analysis or the Intelligent Investor or someone belonging to the philosophy (there are about 10 classics or so...could have been any). It did in fact mention the coin flipping example. It did however also mention that out of 20 of Graham's (I believe it was Graham but don't quote me on it) students close to all of them went on to gain spectacular returns.

The Intelligent Investor reprinted a Warren Buffett speech called "The Superinvestors of Graham and Doddsville". Here's a link for any interested. http://www.tilsonfunds.com/superinvestors.html

We may never agree on this but maybe we can agree to disagree. Fact is, index investors do their thing and non-index investors do their thing.

Agreed. To disagree amiably, that is.

[FrugalFred]

I find these kind of posts highly discouraging. And it's not just Boggleheads. Whenever I post on another forum asking if I can retire in 5 years with say... a paid off condo and $300K, everyone says it can't be done. Gonna need at least three times that. But when I do the math, expenses < 3% safe withdrawal rate. Am I missing something?

If I have to work another 20 years, I might as well just shoot myself now. This isn't a life.

[Farm_or]

Don't shoot yourself. You'll just be broke, overworked, and suffering from a gunshot wound.

There are so many points of view, because there are so many different people. It comes down to what you require for comfort. Some people are very Spartan, healthy and resourceful. They can get by on very little. For others? There's never enough resources in the whole world!

[ether]

To me this thread takes the cake for "Crazy Bogleheads" https://www.bogleheads.org/forum/viewto ... st=3412061