What is useful is to figure out what, today, may predict outperformance tomorrow. In choosing fund managers, it's not enough to choose managers who've outperformed in the past - that's not in itself predictive of the future (same is true for home prices as we learned in 2008, individual stocks, etc.). But other characteristics might be predictive, like choosing fund managers who follow a true "value" approach to stock-picking: finding companies with a competitive advantage and buying them below their intrinsic value being one approach to value.
See Warren Buffett's 1984 article "The Superinvestors of Graham and Doddsville" for the best example I know of distinguishing chance price rises from predictable rises: https://www8.gsb.columbia.edu/articles/columbia-business/sup...
It's not only not useful, it's totally obvious some things will always beat the market. "Beating the market" is really just "beating the average". If there's nothing that beats the average, then it means that all stocks do exactly the same thing...
But yes like you said finding things that beat the market in hindsight certainly isn't very useful unless you can learn some specific strategy (e.g. insider information) that was used and employ it yourself (if you choose).
What the did was take a group of college students and have them record what they did, what they ate, and various metrics like their daily weight.
When the “study” was over, the poured over the data looking for some correlation. In all that data, there was sure to be some random correlation, and they found one between chocolate and losing weight.
They then planted the story and watched everyone latch onto it. The follow-up story was about statistics and science, where they pointed out that given a small sample and a short time frame, and given that you are looking for a correlation, you will find one.
But confirming that correlation is where science begins, by testing the hypothesis with appropriate samples, time frames, and controls.
Now, doing that consistently over and over again is something to strive to, but not many other investment in the same risk category do it.
If you aren't doing anything economically useful...don't expect returns greater than inflation in the really long run.
I think the British aristocracy would like a word with you.
Only real estate.
HN Discussion: https://news.ycombinator.com/item?id=19817584
>! Cue pedantry about what 'average' means.
I guess it was either this or blank page. The latter is less likely to grab your attention. Maybe "fillers" have some use after all :-)
And also, what is total notional value of all burgundy in the world? 1bn? That’s nothing in scale with other markets.
But a good incentive to do less than 10 trades per year across 6 accounts.
I just sit in a small number of big ETFs.
The brokerage would make a lot more money off me if they charged $1/trade.
On less liquid names you might have legitimate worries of big market impact, but usually what you get is the bigger the volume you trade the less you pay for actual execution.
That is, I expect to pay lower fees per share the bigger my volume is, not more. A retail(ish) broker will charge you $0.01 per share plus some fixed transaction fee.
An IB with access to dark pools and clever algos will charge you $0.0005 per share and pass on any rebates you get from exchanges if you provide liquidity (as many big orders will), but they will expect you to trade a hundred million $ per day and up.
Edit: looks like this is common in day-trading platforms?
In fact it's the perceived lack of front running risk by the buyers and sellers that make Robin Hood more valuable to Market Makers.
A big institutional shareholder may very well know more than the Market Maker at the other end of the trade, that's a risk for them if the market moves against them. Robin Hood investors are far less likely to have that kind of information so there isn't the same risk that market makers will get shafted.
Basically, you get a discount trading on Robin Hood, because the people taking the other side of the bet know that you're probably not making a smart move.
Don't get high on your own supply
Instead, what you want to buy is hobbyist and other niche goods, assuming you have cash through a recession. As people cut back their budget, there tends to be a glut of highly discretionary stuff in the resale market. Like, my brother-in-law got absolutely fantastic prices on model airplane kits in the aftermath of 2008.
Why not? I would expect luxury goods manufacturers to suffer during a recession, and I would expect the stock price to follow suit.
I don't think it's a mispricing as it's reflecting to reality on the ground, nevertheless I would expect them to bounce back after the recession. So it does seem to be an opportunity you can exploit.
Your second paragraph seems to have shifted to a completely different asset class. No doubt there was fantastic prices on model aircraft kits, but you need to know the market, and it isn't apparent to me whether the model aircraft kit market will behave the same the next time. Plus it's more risky. If I buy a stock, I don't have to worry about it being fake, getting damaged, I can sell trivially at the touch of a button.
Well, you can look at say Rolex to see what happens. They suffered yes but they didn’t cut (list) prices because that would undermine their status. Instead they launched Tudor as the budget-Rolex brand and that seems to have worked OK (for the company anyway). Luxury goods manufacturers often have long histories and are able to look further ahead than a single economic cycle.
Plus the 2nd hand market would be more relevant to what you're suggesting.
There are effectively zero opportunities you can exploit by simply purchasing the stock of publicly traded companies. The probability that they bounce back after a recession is incorporated into the price, the professional investors and hedge funds you're trading against aren't idiots.
>Your second paragraph seems to have shifted to a completely different asset class. No doubt there was fantastic prices on model aircraft kits, but you need to know the market, and it isn't apparent to me whether the model aircraft kit market will behave the same the next time. Plus it's more risky. If I buy a stock, I don't have to worry about it being fake, getting damaged, I can sell trivially at the touch of a button.
The point isn't investing, it's to get the hobby gear you want at a good price. Any potential resale profit is very much a secondary concern.
People are human, they over react to bad news, they inflate bubbles, etc, etc.
It isn't just hedge funds and professional investors you're up against, and even if you are, so? The average hedgefund bod will be thinking about the year end bonus, a stock that may bounce back in 18 months isnt of interest to them. And the higher ups don't want to end up bottom of the performance tables so they aren't going to keep it either.
Then theres the fact that the efficient market hypothesis can only really deal with knowns. The depth of a recession is an open question, sure you can make an educated guess, but theres plenty of wiggle room to take a different view, or maybe I should say your differing view is a vote in setting the 'correct' price.
And finally, I'm not entirely sure the efficient market hypothesis has even been proven, exhibit A) Long Blockchain https://www.bloomberg.com/news/articles/2017-12-21/crypto-cr...
Don't expect such fantastic deals to be had again.