Super Stock Blog

Posts Tagged ‘mutual funds’

Anybody who has studied investing has heard of the random walk hypothesis and the efficient market hypothesis. Both support the idea that you cannot beat the market, that most mutual funds fail to beat the market, that those who do beat it through luck or taking on more risk, and that monkeys throwing darts at the Wall Street Journal can pick better portfolios than most professionals.

Then, you scour the internet and it is full of back-tested results from "gurus" like Peter Lynch, Joseph Piotroski, Ben Graham, Joel Greenblatt, etc. that beat the market. Validea.com and AAII.com are two examples of sites that show these results.

So, what are your thoughts? Can you beat the market or not?

the stock market has an upward drift over time, so just being long a long time, you can have market returns, and you can always leverage this, so you can have a return greater than the market.

Peter Lynch was a portfolio manager during a great bull market. so even some of his bad ideas weren't that bad.

it's really hard to beat it day to day. some people have done it, but most haven't.

there are lots of academic studies that show the market is not efficient.

just today i read an article about an awesome arb on BP credit default swaps vs. the equity options that, in theory, allowed a 158% annual return. one hedge fund did have this trade on: http://www.zerohedge.com/article/how-mis…

there are always opportunities but you can't catch all of them. there is just too much information in the world.

To beat the market??? Are you crazy, man??? the market is the sole friend in the investing. Follow the market an it rewards you.
Let's see our blog how to make friendship with the market.

You can't beat the market, but you can try to ride with it, and reap it's rewards.

I think the closer you are to the inside on the market the better off you are. One problem being that you have no control over the swings, because of the high liquidity. SOME people ie brokers give advice on what people should do and then take fees ie mutual funds. however, all that glitters is not gold, and many have lost much of their retirements as a result of the sttatus quo. the real truth is that anyone can learn to invest and make money. it takes dedication and a real reason for wanting to do it (a good why to get you through the "hows").
a good idea might be to copy those who have done well ala Warren Buffet and George Soros. I think that line will produce plenty of information for you.

The difference is subtle in theory, deafening in practice.

It boils down to the fact that day-to-day the market place is game dominated by the choices of human beings. Human beings are not always rational, logical, organized, or disciplined. Particular kinds of people with exceptional insights and skills can run through the system efficiently IF they stick to the particular kinds of things they do exceptionally well.

On the one hand, over long periods of time (decades) batting averages fall to average for huge numbers of pros. On the other hand, the market does some clearly illogical things. no mathematical formula or efficient market hypothesis can logically explain the Flash Crash of this year or MSFT doubling in price between March and Dec of 2009. (just to pick two things off the top of my head)

To give you a simple example from my own non-random (Greenblatt-ish) wins…at several points during the Euro panic this spring I purchased securities for less than 50% of their cash value. not, mind you, stocks with a calculated, theoretical book value, but securities with an actual turn-in-for cash value that was fixed…all you had to do was wait…6 months. the trick — there is always a trick — is that the payout was in EUR. Logically — grin — the fear driving the selling was that the Euro was going to collapse. Mathematically, however, the fools were valuing the EUR at 50 cents to the USD…not even in the widest dreams of the Beck fanatics was that going to happen in the next 6 months. I might look like a stock market genius on paper (to steal from Greenblatt) but I can do math and have nerves of steal.

BTW — the EUR is currently trading at $1.30+ and the securities are paying out now.

Can you beat the stock market or not?

So you now have your lucrative oil platform jobs. That’s great! But don’t rest on your laurels. Remember that all booms are followed by busts. Remember the example of IT and finance in the dot.com boom and bust in the 90’s. Remember the previous oil boom and bust. it will be no different this time round. But don’t panic! according to the top economists and fund managers (like the legendary Jim Rogers who has bet a large chunk of his personal wealth on the current boom in commodities like oil), this oil boom is likely to last until at least 2014.

1) Savings (401k). this means that you have quite a number of years to save up for the future. Set up your 401k (or whatever they choose to call it by the time you read this) and split up your remaining savings between government bonds and mutual funds and you will have an easy and effortless road to a decent retirement package. With the typical salary an oil worker earns, you can even hire a financial planner to give you impartial advice.

2) Further education. If you want something better than your savings account, remember that those of you working on offshore oil rigs have one very great advantage over most other workers. Not only do you have great salary, you have about 6 months of free time every year, typically spaced out in 2-week to 6-week chunks. all this time is yours to do as you will, including continuing your education, setting up your own business or investments for your future. Unlike an office worker, your 2-weeks on 2-weeks off schedule is ideal for short intense certification courses and part-time correspondence diplomas and degrees. this extra education will be useful to help you find new jobs after the oil boom ends.

3) Investments. A more risky way of spending your time and salary would be in investments. While your 401k and simple index funds give you an effortless and autopilot way to save for your retirement, you can get better returns with options trading (different from day trading) and real estate investing. Both options trading and real estate have a steep learning curve, but unlike office workers, you have more free time and an above average salary to play with. In other words, after you learn the theory from available courses, you have more money to experiment with until you learn how to do it right.

4) Business. An alternative plan would be to set up your own part-time business. three main methods come to mind: a normal offline part-time business (perhaps run from your garage), an MLM business, or an internet marketing business (for example selling goods using eBay). If you like interacting with people, an MLM business would be good for you. If you choose to run your own small business from your garage, your local community college should have some helpful small business courses to help you get started. If you choose internet marketing, you will find a wealth of cheap online courses available. Just type in “internet marketing” or “make money online” into Google.

No matter how great your oil platform job is right now, do remember that it will not last forever. Make sure you are prepared for the eventual end of the oil boom. Don’t be caught with your pants down like so many dot.com workers.

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Warren Buffett calls for retention of estate tax.