Newbie Guide: How to Find a Good Agent for Investment & Insurance?

[Rommie2k6]

LancelotDuLac, you still have yet to provide a single credible argument and all you have is vague generalization and hand waving argument. If you want to continue, I suggest you provide something with more substance.

My claims are backed up by years of work done by real experts who study about economics (usually without any ulterior motive like selling products). Readers can refer to the original post, I believe I provided some good references there.

What have you provided? Vague statements about "behavioral finance" and unsubstantiated claims that there is a growing development of literature to support active management (which you have yet to prove). General hand waving arguments about the problems with the methodology these researchers adopt, but when I press for details you have none except the general word "average". Then, quotes from famous people to lend you support, but these quotes are just mere opinions and not backed up by anything substantial. Finally, you dispute the scientific process and saying there is some art and so we should accept the crap you are suggesting. And coming back the my original point, are you suggesting anything at all? No, it seems that you are arguing for the sake of arguing.

If you have a problem with index investing, then show a method which you think is better. If you cannot, then I don't see the point in continuing this any further.

For example, I can provide you with an example of a good question that challenges that notion that index investing may not be the best solution:

"DFA funds use a method that overweight small and value stocks and create a modified index, which they call an enhanced index. In research, it has been arguably shown on many occasions that small and value stocks provide a higher expected return on a long-term basis. Therefore, using DFA enhanced index funds will enable one to outperform the market"

In reality, there is quite substantial evidence (although not 100% convincing) that DFA funds do outperform normal index funds. On a personal level, if I had access to DFA funds, I would place half of money with them. FYI, DFA funds are only available to accredited investors.

 

[LancelotDuLac]

Stop cherry picking your data and read the proper summary:

There are three major versions of the hypothesis: "weak", "semi-strong", and "strong". Weak EMH claims that prices on traded assets (e.g., stocks, bonds, or property) already reflect all past publicly available information. Semi-strong EMH claims both that prices reflect all publicly available information and that prices instantly change to reflect new public information. Strong EMH additionally claims that prices instantly reflect even hidden or "insider" information. There is evidence for and against the weak and semi-strong EMHs, while there is powerful evidence against strong EMH.

EMH has its problems/limitations yes, but nobody has found a better model to displace it, and just because there are problems doesn't mean that it is completely wrong and should be thrown out of the window. So please clarify which version of EMH you are disputing? As to the non-random walk publication, have you read the book yet? Which form of EMH were they disputing? I have not read it so I cannot comment. And bear in mind that a published journal/book is not sufficient to justify consensus amongst the experts. Neither is a quote from Buffet, he didn't even mention which version of EMH he was talking about. But again this is all irrelevant, since it has not much effect on choosing index investing over active.

Well, I happen to be exposed to this partiular theory as well, I often delve into both sides of the coins to continually upgrade myself whereas you are still entrenched in your passive investment mode.

Since you haven't read it, why don't you go read it first and then come back and talk about this topic. This non-random walk publication happens to be what I term as the newer literature in finance relative to passive investing models. With time, active investing has had a higher % of out-performance due to the advent of technology.

While there is no particular model or methodology today doesn't dismiss the fact that there are a select group of people (a growing group infact) WHO ARE OUT-PERFORMING ON A REGULAR BASIS. SO GET THAT INTO YOUR THICK SKULL.

So for your sake, pray hard that some academic will publish a journal or paper which will be so widely accepted so that it can be accepted by you because of your fixed mindset.

A mindset cannot be changed, it can only be shifted.

 

[LancelotDuLac]

LancelotDuLac, you still have yet to provide a single credible argument and all you have is vague generalization and hand waving argument. If you want to continue, I suggest you provide something with more substance.

My claims are backed up by years of work done by real experts who study about economics (usually without any ulterior motive like selling products). Readers can refer to the original post, I believe I provided some good references there.

What have you provided? Vague statements about "behavioral finance" and unsubstantiated claims that there is a growing development of literature to support active management (which you have yet to prove). General hand waving arguments about the problems with the methodology these researchers adopt, but when I press for details you have none except the general word "average". Then, quotes from famous people to lend you support, but these quotes are just mere opinions and not backed up by anything substantial. Finally, you dispute the scientific process and saying there is some art and so we should accept the crap you are suggesting. And coming back the my original point, are you suggesting anything at all? No, it seems that you are arguing for the sake of arguing.

If you have a problem with index investing, then show a method which you think is better. If you cannot, then I don't see the point in continuing this any further.

For example, I can provide you with an example of a good question that challenges that notion that index investing may not be the best solution:

"DFA funds use a method that overweight small and value stocks and create a modified index, which they call an enhanced index. In research, it has been arguably shown on many occasions that small and value stocks provide a higher expected return on a long-term basis. Therefore, using DFA enhanced index funds will enable one to outperform the market"

In reality, there is quite substantial evidence (although not 100% convincing) that DFA funds do outperform normal index funds. On a personal level, if I had access to DFA funds, I would place half of money with them. FYI, DFA funds are only available to accredited investors.

I do not quote any specifics when it comes to a product is simple. If I do, you would shoot me that I'm promoting my products? If I don't you would say I never provide concrete examples.

Different people use different methods. To name 2 very diffrent public succesful money managers- Warren Buffet and George Soros.

They are like the north pole and south pole in their investing methods, yet both are able to out-perform the market using different means.

Because you are so entrenched in your passive mode, you cannot accept the fact that people can out-perform.

Let me give you an indication of how I manage my client's portfolio.
Last year I was overweight in Sg, Indon, Thai and India equity funds due to my own analysis which I started to dispose of in Oct/Nov period because the market had over-run my data.

I started to overweight into mining, resources, commodities and US funds, of which I have underweight US funds recently.

Compared to your index funds, I would have out-performed it (compositely) by roughly close to 20%. However this is super-normal return for the very fact that we are in a recovery stage.

An overweight/underweight method for me has been a much more productive method rather than your passive method for the last 10 years (there are times i underperform against the index too) but on a cumulative total return, it has been better.

Besides using funds, I also used tools such your self-claimed "exotic products" for hedging purposes during certain points of the economy where it is wiser to sit on the sidelines and wait.

There are also clients who due to their different needs (needs the cash to be highly liquid) invest in other forms of products which cannot be used for comparision here.

I acknowledge your viewpoints on the fact that there are many many FAs in the industry who give rubbish advice and only out to make a quick buck but do not think that a retail investor is better off once you are educated because of the very simple fact that the retail investor has no access beyond the traditional products. Some products which were previously only available at the high-net worth level is increasingly becoming available to the masses.

Often as I advocated to my own clients, understanding is important before we jump into it. However, there are times even when I advised against something, my client wants to do it, then I just become an executor of the trade.

For new products on the line, I often take a back-seat first and understand it fully before I recommend it. There are times when I simply ignore the product cause it's either

1) I can't understand it too
2) It's a crap product

 

[LancelotDuLac]

http://en.wikipedia.org/wiki/Efficient-market_hypothesis

Please do read in its entirety, there are more in the summary.A nice summary of what EMH is about and counter-criticism of it.
Includes something by Mr Warren Buffet.

A key work on random walk was done in the late 1980s by Profs. Andrew Lo and Craig MacKinlay; they effectively argue that a random walk does not exist, nor ever has. Their paper took almost two years to be accepted by academia and in 1999 they published "A Non-random Walk Down Wall St." which collects their research papers on the topic up to that time.

Warren Buffet has also argued against EMH, saying the preponderance of value investors among the world's best money managers rebuts the claim of EMH proponents that luck is the reason some investors appear more successful than others

Due to conventional wisdom or self-correcting nature as you like to point out, it is hard for the standing thoughts to be replaced.

Which has always been my intial points about
1) being open minded
2) Discernment
3) Investment is ever-changing
4) Flaws of academic works

Your favorite quote of plse show me of a standard methodical systematic method- well there isn't because for the very simple fact that investment is not a pure science. It is taking into account of available information and analysing it and making the most informed decision. And the truth is not everyone has the same amount of information.

or how do I pick the correct fund/advisor? - Well which is why investing is more than just simple. Research and analysis, as with portfolio management ideology-> Instead of pure passive or pure active, a hybrid manner can also be established till you can be more assured of that particular fund and advisor works?

And like you echo before, today's winner could be tmr's losers. Hence it is a continual effort which refutes your point that investment is easy as ABC.

Did I cherry pick? I even said to read the whole article did I not?I just plucked out 2 relevant paragraphs in it to show to you.

 

[Rommie2k6]

Well, I happen to be exposed to this partiular theory as well, I often delve into both sides of the coins to continually upgrade myself whereas you are still entrenched in your passive investment mode.

Since you haven't read it, why don't you go read it first and then come back and talk about this topic. This non-random walk publication happens to be what I term as the newer literature in finance relative to passive investing models. With time, active investing has had a higher % of out-performance due to the advent of technology.

Stop your generalization. If you claimed you have read it, what are the claims made by the book? Outperformance by how much %? Is it before or after expenses? What is the probability of outperformance? What is the probability of underperformance, and how much is the underperformance? What is the methodology used to obtain consistent outperformance?

As usual empty talk and no substance.

While there is no particular model or methodology today doesn't dismiss the fact that there are a select group of people (a growing group infact) WHO ARE OUT-PERFORMING ON A REGULAR BASIS. SO GET THAT INTO YOUR THICK SKULL.

So for your sake, pray hard that some academic will publish a journal or paper which will be so widely accepted so that it can be accepted by you because of your fixed mindset.

A mindset cannot be changed, it can only be shifted.

There are a few very successful investors that do appear to outperform the market. However, even note that Buffet failed to outpeform the S&P 500 sometime back during the 2008 crash if I am not mistaken, so it's not always that consistent.

You claim there is a growing group. Really? Where is the proof? Where is the study to back up your claim? Even if your claim is true, what is the common strategy they use to outperform the market? There is none as you have admitted "while there is no particular model or methodology". So why are we having this conversation?

Even if I take your empty words at face value, we have no way to figure out what makes these supposed consistent outperformers successful. So what is the point? How does this help the normal investor? IT DOES NOT...

 

[Rommie2k6]

I do not quote any specifics when it comes to a product is simple. If I do, you would shoot me that I'm promoting my products? If I don't you would say I never provide concrete examples.

Different people use different methods. To name 2 very diffrent public succesful money managers- Warren Buffet and George Soros.

They are like the north pole and south pole in their investing methods, yet both are able to out-perform the market using different means.

That's only 2 successful investors who maybe have more skill than luck. Out of how many thousands or millions who have tried and failed?

Because you are so entrenched in your passive mode, you cannot accept the fact that people can out-perform.

ARE YOU A RETARD? DID I NOT JUST SAY THAT BASED ON PROBABILITY THERE WILL ALWAYS BE SOMEONE OUTPERFORMING THE MARKET? CAN'T YOU GET IT INTO YOUR RETARDED BRAIN THAT JUST BECAUSE SOMEBODY CAN OUTPERFORM THE MARKET DOESN'T MEAN THAT THE MAJORITY CAN? AND THE FACTS STILL REMAIN THAT 99% OF THE PEOPLE WILL NOT BE ABLE TO CONSISTENTLY OUTPERFORM THE MARKET OVER A LONG TIME PERIOD?!?!

If you can't even understand basic concepts like, shut up!!!

Let me give you an indication of how I manage my client's portfolio.
Last year I was overweight in Sg, Indon, Thai and India equity funds due to my own analysis which I started to dispose of in Oct/Nov period because the market had over-run my data.

I started to overweight into mining, resources, commodities and US funds, of which I have underweight US funds recently.

Compared to your index funds, I would have out-performed it (compositely) by roughly close to 20%. However this is super-normal return for the very fact that we are in a recovery stage.

What is the portfolio investment objective and long-term asset allocation? What composite index did you compare it to and is it a comparable index? Did you account for net returns after fees and commission?

An overweight/underweight method for me has been a much more productive method rather than your passive method for the last 10 years (there are times i underperform against the index too) but on a cumulative total return, it has been better.

So you only have 10 years of performance, that's hardly surprising. If you have 20-30 years maybe I will look at it differently. How much is the outperformance over this period on an annualized basis inclusive of the extra commission, sales charge and whatever wrap fee you are charging?

So is this what you have been harping on all along? What you have described is tactical asset allocation. And you call yourself a damn finance professional and you don't even it's name!?!? I am ambivalent towards tactical asset allocation (TAA). What this means is that I think that method has some merits but I have some reservations because:
(1) It requires one to be more involved in managing one's investment in order to do periodic tactical shifts, and more involved monitoring work.
(2) It requires one to find a good and reproducible methodology to execute such tactical shifts that have been proven to work (and this would involve A LOT OF TIME for research - hardly a feasible option for the average joe).
(3) The outperformance may be marginal and after the extra fees and expenses, it may yield the same performance as plain passive index fund
(4) If I hire a full time professional to do this (like you), the extra wrap fee charged may nullify the extra outperformance, giving the same performance as plain passive index fund. There is also a risk that the outperformance by TAA over the long-term will be lower than the extra wrap fees charged.

Besides using funds, I also used tools such your self-claimed "exotic products" for hedging purposes during certain points of the economy where it is wiser to sit on the sidelines and wait.

There are also clients who due to their different needs (needs the cash to be highly liquid) invest in other forms of products which cannot be used for comparision here.

And how exactly does these products work that it cannot be achieved by normal investment methods? Generalities again, no specifics!!!

I acknowledge your viewpoints on the fact that there are many many FAs in the industry who give rubbish advice and only out to make a quick buck but do not think that a retail investor is better off once you are educated because of the very simple fact that the retail investor has no access beyond the traditional products. Some products which were previously only available at the high-net worth level is increasingly becoming available to the masses.

Really, so what examples of non-traditional products are so much better? Examples?

 

[Cashcow]

That's only 2 successful investors who maybe have more skill than luck. Out of how many thousands or millions who have tried and failed?



ARE YOU A RETARD? DID I NOT JUST SAY THAT BASED ON PROBABILITY THERE WILL ALWAYS BE SOMEONE OUTPERFORMING THE MARKET? CAN'T YOU GET IT INTO YOUR RETARDED BRAIN THAT JUST BECAUSE SOMEBODY CAN OUTPERFORM THE MARKET DOESN'T MEAN THAT THE MAJORITY CAN? AND THE FACTS STILL REMAIN THAT 99% OF THE PEOPLE WILL NOT BE ABLE TO CONSISTENTLY OUTPERFORM THE MARKET OVER A LONG TIME PERIOD?!?!

Why you so rude one?

Luckily you are not FA or else sure tio complain from customer.

This is a forum. You can't accept other ppl's opinion oso shld not start all these name calling. You say him retard means scolding his parents are oso retards.

 

[LancelotDuLac]

That's only 2 successful investors who maybe have more skill than luck. Out of how many thousands or millions who have tried and failed?



ARE YOU A RETARD? DID I NOT JUST SAY THAT BASED ON PROBABILITY THERE WILL ALWAYS BE SOMEONE OUTPERFORMING THE MARKET? CAN'T YOU GET IT INTO YOUR RETARDED BRAIN THAT JUST BECAUSE SOMEBODY CAN OUTPERFORM THE MARKET DOESN'T MEAN THAT THE MAJORITY CAN? AND THE FACTS STILL REMAIN THAT 99% OF THE PEOPLE WILL NOT BE ABLE TO CONSISTENTLY OUTPERFORM THE MARKET OVER A LONG TIME PERIOD?!?!

If you can't even understand basic concepts like, shut up!!!



What is the portfolio investment objective and long-term asset allocation? What composite index did you compare it to and is it a comparable index? Did you account for net returns after fees and commission?



So you only have 10 years of performance, that's hardly surprising. If you have 20-30 years maybe I will look at it differently. How much is the outperformance over this period on an annualized basis inclusive of the extra commission, sales charge and whatever wrap fee you are charging?

So is this what you have been harping on all along? What you have described is tactical asset allocation. And you call yourself a damn finance professional and you don't even it's name!?!? I am ambivalent towards tactical asset allocation (TAA). What this means is that I think that method has some merits but I have some reservations because:
(1) It requires one to be more involved in managing one's investment in order to do periodic tactical shifts, and more involved monitoring work.
(2) It requires one to find a good and reproducible methodology to execute such tactical shifts that have been proven to work (and this would involve A LOT OF TIME for research - hardly a feasible option for the average joe).
(3) The outperformance may be marginal and after the extra fees and expenses, it may yield the same performance as plain passive index fund
(4) If I hire a full time professional to do this (like you), the extra wrap fee charged may nullify the extra outperformance, giving the same performance as plain passive index fund. There is also a risk that the outperformance by TAA over the long-term will be lower than the extra wrap fees charged.



And how exactly does these products work that it cannot be achieved by normal investment methods? Generalities again, no specifics!!!



Really, so what examples of non-traditional products are so much better? Examples?

First of all, when I talked about relative index comparision, it is always to a relevant index like e.g. regional MSCIs or single country index (point to note that different funds uses different benchmarks as well. I am curious to your defination of a "correct" benchmark)

Secondly, when I talk about out-performance, it is always nett after the bank charges.

Thirdly I do not claim myself to be an extremely successful money manager yet because there are so many WHO ARE SO MUCH BETTER THAN ME and with even longer track records.

I pointed out Soros and Buffet because everyone would know them but they are not the only 2 " more skillful" money managers in this world. Even if I throw out names of other successful money managers, the general public and yourself may not know them because there isn't an much exposure on a general basis.

I do not name any particular methodology or strategy because different people uses different methods. There are more than 1 solution to a problem.

Why do I need to name my particular strat? By explaining in clear simple english, the general layman can understand easier. You always try to use the BIG FINANCIAL WORDS to tell the audience you know alot? (If I was to name it, the correctly named methodolgy I am using is actually Modern Portfolio Theory mixed with tactical asset allocation embedded. I do not believe markets are efficient)

For e.g. a businessman client would not want to be vested into your typical traditonal products for wealth creation as he can create wealth himself/herself. Their concerns would be more on cashflow and interest where a dual currency model or short term note are able to serve their needs better.

Why don't you read up more on what dual currency and short term notes are about first and how it works?

Maybe with your "VAST" knowledge on academic findings, you can show to us that is a toxic product

 

[LancelotDuLac]

So you only have 10 years of performance, that's hardly surprising. If you have 20-30 years maybe I will look at it differently. How much is the outperformance over this period on an annualized basis inclusive of the extra commission, sales charge and whatever wrap fee you are charging?

So is this what you have been harping on all along? What you have described is tactical asset allocation. And you call yourself a damn finance professional and you don't even it's name!?!? I am ambivalent towards tactical asset allocation (TAA). What this means is that I think that method has some merits but I have some reservations because:
(1) It requires one to be more involved in managing one's investment in order to do periodic tactical shifts, and more involved monitoring work.

(2) It requires one to find a good and reproducible methodology to execute such tactical shifts that have been proven to work (and this would involve A LOT OF TIME for research - hardly a feasible option for the average joe).

(3) The outperformance may be marginal and after the extra fees and expenses, it may yield the same performance as plain passive index fund

(4) If I hire a full time professional to do this (like you), the extra wrap fee charged may nullify the extra outperformance, giving the same performance as plain passive index fund. There is also a risk that the outperformance by TAA over the long-term will be lower than the extra wrap fees charged.

This is what I had said SO MANY TIMES! ARE YOU A RETARD? OR BLIND?
A average joe would prob be better off on a general basis if he had minimal time or lack of deep interest to do better.

BUT INVESTING IS NOT SO EASY as you claim much earlier? If you want to be better, then the time and efforts required are more than just little.

Which was what I pointed out so MANY TIMES!
Do you want to be AVERAGE or TOP?

You only know how to 纸上谈兵, and just hide behind academic findings which ARE FLAWED AND LIMITED.

Technology is a key driver to why more and more people are beating the markets relative to the past because it has helped us to spot anomalies in the market, hence leveraging on a better than market return.

And availability of information is NEVER EQUAL, institutions have greater resources, greater access to information. A SIMPLE FACT THAT YOU DON'T KNOW MEH?

For the very fact that out-performance can succeed through active investing is because the WINNERS WIN THROUGH THE LOSERS hence it is always a minority DUMDASS!

 

[LancelotDuLac]

By the way, alot of funds which claims to be active are actually index-tracking to a great percentage due to the mandate of the fund fyi.

So it is wrong to assume that a HUGE PERCENTAGE OF FUNDS ARE ACTIVELY MANAGED. (which your academic studies are using in its data analysis)

 

[LancelotDuLac]

And in case things I have said SO MANY TIMES SLIPPED YOUR MEMORY.

I do not just advocate active investing over pasive investing. Both methods have their merits.

For e.g. a new person with interest in finance, he/she would be better off in the start vested into index funds, then subsequently branch out more as he/she learns more or finds a good wealth manager.

Which is why I do not adovate any absoulute methodology but solutions have to be catered to the individual.

Rommie2k6, instead of berating others with degrading terms. Have you considered and pondered over the points made by others and explored the alternatives? From the way you post and talk, you give the impression you are too entrenched in your mindset.

Learning is never ending.
Analysis and sharings must be discerned. (Recommendations and analysis given by the bank are not always concurred by myself also)

Take a step back and realise this world is much bigger than you or me. There are many many brillant people out there.

Wisest is the one who realises that he knows nothing.

 

[Rommie2k6]

Why you so rude one?

Luckily you are not FA or else sure tio complain from customer.

This is a forum. You can't accept other ppl's opinion oso shld not start all these name calling. You say him retard means scolding his parents are oso retards.

It is not about accepting people's opinion. It is about repeating the same point 3 times and having the person not understanding it and insisting on twisting my points and arguments to his/her favor.

 

[Rommie2k6]

And in case things I have said SO MANY TIMES SLIPPED YOUR MEMORY.

I do not just advocate active investing over pasive investing. Both methods have their merits.

For e.g. a new person with interest in finance, he/she would be better off in the start vested into index funds, then subsequently branch out more as he/she learns more or finds a good wealth manager.

Which is why I do not adovate any absoulute methodology but solutions have to be catered to the individual.

Rommie2k6, instead of berating others with degrading terms. Have you considered and pondered over the points made by others and explored the alternatives? From the way you post and talk, you give the impression you are too entrenched in your mindset.

That's because you are either a retard or you are paid to refuse to listen: How many times have I stated the distinction between index investing winning 100% of the time vs active management and index investing winning 95% of the time vs active management. My claim is the latter, yet you insist on the former when I have clarified the difference between the two at least 3 times (I guess) in my post. Sorry, I just have no patience to talk nicely to people like you who simply cannot or refuse to get it. If you can't live with the heat, then go somewhere else.

Learning is never ending.
Analysis and sharings must be discerned. (Recommendations and analysis given by the bank are not always concurred by myself also)

Take a step back and realise this world is much bigger than you or me. There are many many brillant people out there.

Wisest is the one who realises that he knows nothing.

True... but you have OFFERED NOTHING OF SUBSTANCE and only vague generalization all throughout your post. It was only after I identified your strategy as Tactical Asset Allocation did you use this term. I'm you are so good, why not use it from the 1st post, so that we know exactly what we are discussing about? How many times have I pushed you for specifics and how many times have you ignored them? You have also conveniently neglected to address any of the points I raised about my reservations of Tactical Asset Allocation. How do you expect people to believe you when you evade every time? Stop smoking around please!

ANSWER MY QUESTIONS IF YOU CAN, AND STOP TAKING COVER.

 

[Rommie2k6]

This is what I had said SO MANY TIMES! ARE YOU A RETARD? OR BLIND?
A average joe would prob be better off on a general basis if he had minimal time or lack of deep interest to do better.

I thought we had agreed on this point already?

BUT INVESTING IS NOT SO EASY as you claim much earlier? If you want to be better, then the time and efforts required are more than just little.

I have presented a rather detailed account of the steps involved in investing and showed that it requires little time and effort. You have not disputed this.

Then you bring in Tactical Asset Allocation... of course that requires an order of magnitude more time and effort, but as I have raised my concerns, the merits of TAA may not be substantial at the end of the day. Which is why I say, the average joe shouldn't care.

Which was what I pointed out so MANY TIMES!
Do you want to be AVERAGE or TOP?

You only know how to 纸上谈兵, and just hide behind academic findings which ARE FLAWED AND LIMITED.

And you have not been listening. The average investor who invest the average index fund will end up close to the top eventually, because all the actively managed funds would have underperformed or close shop.

You accuse people of hiding behind established work, yet you do not bring any evidence to refute established work. As usual you make generalizations with nothing specific. You keep on harping of "flaws" and "limitations"... so prove that yours is better! If not, kindly shut up and stop acting like a moron.

Technology is a key driver to why more and more people are beating the markets relative to the past because it has helped us to spot anomalies in the market, hence leveraging on a better than market return.

And availability of information is NEVER EQUAL, institutions have greater resources, greater access to information. A SIMPLE FACT THAT YOU DON'T KNOW MEH?

For the very fact that out-performance can succeed through active investing is because the WINNERS WIN THROUGH THE LOSERS hence it is always a minority DUMDASS!

No the fact that outperformers succeed cannot be clearly distinguished between LUCK and SKILL. Again, you conveniently fail to address the supporting evidence I have provided. This is fact, you have not provided any evidence to refute this.

 

[Rommie2k6]

I think this is a very helpful thread that shows just how underhanded people from the financial institutions can be, and how many arguments may seem convincing but they are really not.

Let's see to summarize:
1) From my first post, I have substantiated most if not all of my points with established research and done by real experts who spend their lives studying economics and investing without any vested interest to product a particular product.
2) Our banker friend agrees that index investing is the best option for the average joe, and we agree on that after some miscommunication. The point of contention is that he thinks that active management is better in some cases, and he believes he can be in the "upper tail" of returns which will allow him to outperform the market.
3) I countered by stating evidence that the the odds of outperforming is very low and the odds of choosing an outperforming portfolio is even lower. I also highlight the problem of distinguishing between skill and luck. Our banker friend cites example of successful active investors, and I responded that it does not invalidate any of my previous points. Our banker friend then attempts to twist and misrepresent my arguments presented (either intentionally or because he simply cannot understand) which I had to clarify again. When pressed to the wall for specific evidence to back up his claim, he evades this most of the time. When I raised additional evidence to counter his points, he evades this most of the time.
4) Finally after much discussion, we learn that our banker friend is actually talking about Tactical Asset Allocation! Does he not even know the name of the strategy he is using? I also raised my concerns about Tactical Asset Allocation and why it is probably not worth the trouble, which are again evaded in his latest post.

 

[LancelotDuLac]

(1) It requires one to be more involved in managing one's investment in order to do periodic tactical shifts, and more involved monitoring work.

(2) It requires one to find a good and reproducible methodology to execute such tactical shifts that have been proven to work (and this would involve A LOT OF TIME for research - hardly a feasible option for the average joe).

(3) The outperformance may be marginal and after the extra fees and expenses, it may yield the same performance as plain passive index fund

(4) If I hire a full time professional to do this (like you), the extra wrap fee charged may nullify the extra outperformance, giving the same performance as plain passive index fund. There is also a risk that the outperformance by TAA over the long-term will be lower than the extra wrap fees charged.

QUOTE]

I belive point 1 and 2 has been covered in my earlier posts. It takes constant and continual research for it to work.

Main reasons for outperforming is

1)Technology- it has been a KEY DRIVER to why more are beating the markets relative to the past because it has helped us to spot anomalies in the market, hence leveraging on a better than market return.

2)Availability of information is NEVER EQUAL, institutions have greater resources, greater access to information.

These are the 2 main causes for out-performance in active management.

These are also illustrated in the "A Non-random Walk Down Wall St." which was to counter/refute a much earlier publication "A random Walk Down Wall St." In this publication, the authors have proved and being ACCEPTED BY THE ACADEMIC SOCIETY that the market is and can be beated over a long run due to the advent of technology and behavorial finance.

The BIG QUESTION IS HOW? In my opinion, it would be near impossible for a retail investor to replicate it succesfully due to

1) Lack of resources (at the institutional level, we have a whole team of analyst for different information)

2) Lack of information, information availability is unfortunately not at a equal level.

I quote you back about the 30% rule of investors being able to beat the market, that is due to the fact that the winners "earn" from the losers by exploiting the anomalies in the market.

Like I said, go read more on books of how active managers are able to out-perform. AFTER YOU READ then come here and talk. You only know the strengths of passive investing because OBVIOUSLY IF THE BOOKS YOU ARE READING ARE TALKING ABOUT THE STRENGTHS OF PASSIVE INVESTING, WOULD IT TALK ABOUT HOW ACTIVE INVESTING CAN WORK? DUH? (Tell me if what I have said about you is true or not, that your readings are dominantly in the passive investing area)

Furthermore, academic publications on passive investing originate mostly pre-1990s, authors in the modern era just repeat and sell (self vested interst) as "best-sellers".

 

[LancelotDuLac]

That's because you are either a retard or you are paid to refuse to listen: How many times have I stated the distinction between index investing winning 100% of the time vs active management and index investing winning 95% of the time vs active management. My claim is the latter, yet you insist on the former when I have clarified the difference between the two at least 3 times (I guess) in my post. Sorry, I just have no patience to talk nicely to people like you who simply cannot or refuse to get it. If you can't live with the heat, then go somewhere else.



True... but you have OFFERED NOTHING OF SUBSTANCE and only vague generalization all throughout your post. It was only after I identified your strategy as Tactical Asset Allocation did you use this term. I'm you are so good, why not use it from the 1st post, so that we know exactly what we are discussing about? How many times have I pushed you for specifics and how many times have you ignored them? You have also conveniently neglected to address any of the points I raised about my reservations of Tactical Asset Allocation. How do you expect people to believe you when you evade every time? Stop smoking around please!

ANSWER MY QUESTIONS IF YOU CAN, AND STOP TAKING COVER.

index investing winning 95% of the time vs active management. [/COLOR]- The statistical result by the academics is flawed because for the very simple fact that alot of funds in the market ARE NOT TRUE ACTIVE MANAGEMENT, in fact if you analyse the funds they used for the studies, a huge majority are sub-index tracking where they follow closely the composition of the index abject to minor tweaks. So this finding is flawed

By the way, alot of funds which claims to be active are actually index-tracking to a great percentage due to the mandate of the fund fyi.

So it is wrong to assume that a HUGE PERCENTAGE OF FUNDS ARE ACTIVELY MANAGED. (which your academic studies are using in its data analysis)

DO YOU EVEN ANALYSE THE RESULTS BY THE ACADEMICS? So you just read and ACCEPT BLINDLY? Where is your thinking process? WHAT AN IDIOT?!

 

[Rommie2k6]

index investing winning 95% of the time vs active management. [/color]- The statistical result by the academics is flawed because for the very simple fact that alot of funds in the market ARE NOT TRUE ACTIVE MANAGEMENT, in fact if you analyse the funds they used for the studies, a huge majority are sub-index tracking where they follow closely the composition of the index abject to minor tweaks. So this finding is flawed

It is true that some funds are "closet indexers", and these "closet indexers" underperform more likely due to their expensive fees. However, I have yet to see any conclusive evidence that majority of investment products are "closet indexers". Show me some evidence to back up your claim.

DO YOU EVEN ANALYSE THE RESULTS BY THE ACADEMICS? So you just read and ACCEPT BLINDLY? Where is your thinking process? WHAT AN IDIOT?!

No, I still think of it, and even amongst the index/passive community there is continuous debate over many issues. However, you take me for an idiot if you think you can make up arguments without any proof to back it up and expect people to listen to you.

 

[Rommie2k6]

(1) It requires one to be more involved in managing one's investment in order to do periodic tactical shifts, and more involved monitoring work.

(2) It requires one to find a good and reproducible methodology to execute such tactical shifts that have been proven to work (and this would involve A LOT OF TIME for research - hardly a feasible option for the average joe).

(3) The outperformance may be marginal and after the extra fees and expenses, it may yield the same performance as plain passive index fund

(4) If I hire a full time professional to do this (like you), the extra wrap fee charged may nullify the extra outperformance, giving the same performance as plain passive index fund. There is also a risk that the outperformance by TAA over the long-term will be lower than the extra wrap fees charged.

I belive point 1 and 2 has been covered in my earlier posts. It takes constant and continual research for it to work.

Which is precisely my point why your method is not amenable to the retail investor ASSUMING that it works as advertised, and this is an assumption that I still challenge. You have clearly neglected to address pt 3 and 4.

Main reasons for outperforming is

1)Technology- it has been a KEY DRIVER to why more are beating the markets relative to the past because it has helped us to spot anomalies in the market, hence leveraging on a better than market return.

2)Availability of information is NEVER EQUAL, institutions have greater resources, greater access to information.

These are the 2 main causes for out-performance in active management.

These are 2 main plausible reasons for outperformance but it has yet to be proven through proper studies. The reasons you cited are only available to institutional investors and not the average joe. Again... my point that your points do not apply to retail investors. And even if the average joe choose to appoint a professional to manage his/her money, how can he decide which institutional investor has the better resource and strategy? He cannot...

These are also illustrated in the "A Non-random Walk Down Wall St." which was to counter/refute a much earlier publication "A random Walk Down Wall St." In this publication, the authors have proved and being ACCEPTED BY THE ACADEMIC SOCIETY that the market is and can be beated over a long run due to the advent of technology and behavorial finance.

Where is the proof that it is accepted in the academic community that active investment can win passive investment? I have asked you numerous times to show the proof, and you cannot. Again, note that the acknowledgement that there will be outperformers in any academic study DOES NOT endorse active management as being superior to passive investment. If you cannot understand the research done, stop twisting the conclusion to fit your agenda.

As before, if you have read that book, cite specific evidence and arguments that was presented. I have asked you before and you have evaded it.

The BIG QUESTION IS HOW? In my opinion, it would be near impossible for a retail investor to replicate it succesfully due to

1) Lack of resources (at the institutional level, we have a whole team of analyst for different information)

2) Lack of information, information availability is unfortunately not at a equal level.

I quote you back about the 30% rule of investors being able to beat the market, that is due to the fact that the winners "earn" from the losers by exploiting the anomalies in the market.

That study was done on the assumption where EMH is completely wrong. In reality, EMH is probably half-right, so the percentage of winners is real-life is going to be lower. Also, if there are anomalies in the market and if everyone starts exploiting it, wouldn't the anomaly disappear? Finally, you again have neglected my earlier point that an investor usually picks a portfolio of funds. In other to beat the index, the investor has to ensure that all his active funds are outperformers. Given that outperforming funds are a minority... it is extremely unlikely that an actively managed portfolio will beat the index over the long term.

Like I said, go read more on books of how active managers are able to out-perform. AFTER YOU READ then come here and talk. You only know the strengths of passive investing because OBVIOUSLY IF THE BOOKS YOU ARE READING ARE TALKING ABOUT THE STRENGTHS OF PASSIVE INVESTING, WOULD IT TALK ABOUT HOW ACTIVE INVESTING CAN WORK? DUH? (Tell me if what I have said about you is true or not, that your readings are dominantly in the passive investing area)

Furthermore, academic publications on passive investing originate mostly pre-1990s, authors in the modern era just repeat and sell (self vested interst) as "best-sellers".

Since you claim you know so much about active investing, I have previously challenged you to name and detail a specific methodology that is known to consistently beat the index. You have also evaded this question.

 

[LancelotDuLac]

I think this is a very helpful thread that shows just how underhanded people from the financial institutions can be, and how many arguments may seem convincing but they are really not.

Let's see to summarize:
1) From my first post, I have substantiated most if not all of my points with established research and done by real experts who spend their lives studying economics and investing without any vested interest to product a particular product.

So did I substantiated it with real research that active management can out-perform the market. Current findings are flawed of passive investing out-performing 95% because they use a sweeping statistics (which is true unless you can refute about my point on what sample size they are using). So as a retail investor, you can only access these traditional products which you may or may not know whether it is a real active managed product.
2) Our banker friend agrees that index investing is the best option for the average joe, and we agree on that after some miscommunication. The point of contention is that he thinks that active management is better in some cases, and he believes he can be in the "upper tail" of returns which will allow him to outperform the market.

Index investing is BEST FOR THE AVERGAGE JOE ON A GENERAL BASIS BUT IT IS NOT THE BEST. Of course on the assumption being all things equal where the average joe

1) spends minimal time
2) does not seek advice from a wealth manager with a proven track record
2) has no access beyond tradtional products
While I do not out-perform every year in year out, my track record has so far proven to be better on a cumulative basis. However as I have qualified, there ARE SO MANY MANY MORE BETTER PEOPLE WHO NOT ONLY HAVE A BETTER BUT ALSO LONGER TRACK RECORD THAN ME.

3) I countered by stating evidence that the the odds of outperforming is very low and the odds of choosing an outperforming portfolio is even lower. I also highlight the problem of distinguishing between skill and luck. Our banker friend cites example of successful active investors, and I responded that it does not invalidate any of my previous points. Our banker friend then attempts to twist and misrepresent my arguments presented (either intentionally or because he simply cannot understand) which I had to clarify again. When pressed to the wall for specific evidence to back up his claim, he evades this most of the time. When I raised additional evidence to counter his points, he evades this most of the time.

While stats show that 30% can out-perform on a given year and the odds of choosing an outperforming portfolio in the long run is even lower, that is based on a FLAWED SAMPLE SIZE AND ASSUMPTION.

1)I need not be out-performing EVERY SINGLE YEAR IN ORDER TO BEAT THE INDEX which is what you concur as well, no?

2)EVEN IF I USED THE ACADEMIC ASSUMPTION WHERE 95% PERFORM BELOW INDEX (READ POINT ON FLAWED 95% FINDINGS), THE DIFFERENTIAL DOWNSIDE OF SAY THE 70-90 PERCENTILE IS HOW MUCH? PERHAPS YOU WAN TO SHED SOME LIGHT ON THIS?

3) THE 30% THAT OUT-PERFORM ON A GIVEN YEAR, THE UPSIDE COULD BE AS MUCH AS 30% AGAINST INDEX FUND IN ANY GIVEN YEAR.

THESE ARE FACTORS AND CONSIDERATIONS THAT THE ACADEMICS FAIL TO REALISE AND ASSUME AS WELL.

BUFFET AND SOROS ARE NOT THE ONLY 2 WHO ARE SUCCESSFUL IN THE LONG RUN, AS YOU HAVE CONCLUDED YOURSELF AS WELL, THERE ARE FUND MANAGERS AND HEDGE MANAGERS WHO HAVE OUT-PERFORMED IN A 30+ TRACK RECORD. AT THE INDIVIDUAL LEVEL, THERE ARE EVEN MORE STATS WHICH ARE NOT CONSIDERED BY THE ACADEMIC SOCIETY.

Academic results and research are useful for analysis and comprehension but if you take in wholesale just because they are established economists then I have pity on your intellectual capacity. PLUS THE VERY FACT THAT YOU HAVE NON-EXPOSURE TO THE OTHER SIDE MAKES YOU INCOMPLETE IN YOUR VIEWPOINTS.
4) Finally after much discussion, we learn that our banker friend is actually talking about Tactical Asset Allocation! Does he not even know the name of the strategy he is using? I also raised my concerns about Tactical Asset Allocation and why it is probably not worth the trouble, which are again evaded in his latest post.

Read earlier post and whiile that may be a main strategy I employ. Different successful wealth managers have differing methods and tactics.

Please read above