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Even finance experts like Matt Levine use index funds. Unless you are mega rich and have connections, you almost certainly have no advantage against the many pe

Even finance experts like Matt Levine use index funds. Unless you are mega rich and have connections, you almost certainly have no advantage against the many people who work 100 hours a week trying (and often failing) to beat the market.

XorNot 4y ago
People do beat the market, but the thing is if you can beat the market then you don't need to accept public money - you become a private trading firm and trade with your own money and keep all the profits. That's the issue: successful firms which beat the market don't keep doing it on behalf of other people for very long.
- bombcar 4y ago
  The “active funds don’t beat index funds” studies showed they actually do - before expenses. After expenses the net return was lower.
  - nly 4y ago
    If that's the case why bother taking external money? Answer: because they make more money from the fees than they do by "beating the market" The truth is if you beat the market by pure luck once you can market your shit fund and lure in thousands more investors for decades.
    - bombcar 4y ago
      Because the goal isn’t to “beat the market” (most beat by a very small amount) - the goal is to make money selling their “services”.
anonporridge 4y ago
This. Imagine the arrogance necessary to believe that you can understand economics, finance, geopolitics, and the vast arrays of industries and competing companies well enough by studying as a hobby in your spare time to get better returns than professional investors who literally spend their entire careers trying to beat the market, and fail on average. Just VTSAX and chill.
- merely-unlikely 4y ago
  You're correct but I'd like to point at that professional investors don't understand all of that either. They spend their careers focused on little niches in which they can find an advantage. So it's less, what are the mysteries of the economic universe, and more, why does the West Texas Intermediate futures curve differ from the Brent curve and how can I profit from the spread? That and the goal of many (most?) professional investors is not to beat the market. For some they just need to have higher returns than cost of funding and anything positive is accretive. Others sell fund investors on things like low market correlation. Or others have more specific goals like hedging future fuel prices for an airline. Point being, individual investors have completely different goals from most professional investors and as you point out, "VTSAX and chill" is the way.
  - tomatocracy 4y ago
    For many professional investors (and certainly for a large class of asset management firms), the big incentive is to accumulate more AUM. Returns can be a strong marketing tool to do that, but they're not the only one.

XorNot 4y ago

People do beat the market, but the thing is if you can beat the market then you don't need to accept public money - you become a private trading firm and trade with your own money and keep all the profits. That's the issue: successful firms which beat the market don't keep doing it on behalf of other people for very long.

bombcar 4y ago
The “active funds don’t beat index funds” studies showed they actually do - before expenses. After expenses the net return was lower.
- nly 4y ago
  If that's the case why bother taking external money? Answer: because they make more money from the fees than they do by "beating the market" The truth is if you beat the market by pure luck once you can market your shit fund and lure in thousands more investors for decades.
  - bombcar 4y ago
    Because the goal isn’t to “beat the market” (most beat by a very small amount) - the goal is to make money selling their “services”.

anonporridge 4y ago

This. Imagine the arrogance necessary to believe that you can understand economics, finance, geopolitics, and the vast arrays of industries and competing companies well enough by studying as a hobby in your spare time to get better returns than professional investors who literally spend their entire careers trying to beat the market, and fail on average. Just VTSAX and chill.

merely-unlikely 4y ago
You're correct but I'd like to point at that professional investors don't understand all of that either. They spend their careers focused on little niches in which they can find an advantage. So it's less, what are the mysteries of the economic universe, and more, why does the West Texas Intermediate futures curve differ from the Brent curve and how can I profit from the spread? That and the goal of many (most?) professional investors is not to beat the market. For some they just need to have higher returns than cost of funding and anything positive is accretive. Others sell fund investors on things like low market correlation. Or others have more specific goals like hedging future fuel prices for an airline. Point being, individual investors have completely different goals from most professional investors and as you point out, "VTSAX and chill" is the way.
- tomatocracy 4y ago
  For many professional investors (and certainly for a large class of asset management firms), the big incentive is to accumulate more AUM. Returns can be a strong marketing tool to do that, but they're not the only one.