Omg
TLDR, I asked chat gpt to summary for me.. but also still too long
:::
The discussion revolves around a fundamental investing question:
Here's a structured summary.
Position 1: Benchmarking against an index is essential (majority view)
Most participants (Mephist0pheLes, limster, RedsYWNA, laokorkor, yiwei, aurvandil, etc.) argue that
an index is the correct benchmark.
Their main arguments
1. The index is the "default" return
If you can buy an index ETF with almost no effort:
- no stock picking
- no market timing
- low fees
...then any active investing should aim to outperform it.
Otherwise, all the additional work isn't adding value.
2. Most active managers fail
Several posters cite the well-known argument from economist
William Sharpe:
- Before fees, active managers collectively earn the market return.
- After fees, active managers as a group underperform.
Therefore:
3. Returns require context
One of the strongest rebuttals:
Someone says:
Others ask:
If:
then you actually underperformed despite making money.
Without comparison, the return alone tells very little.
4. Many investors incorrectly think they're beating the market
Several posters point out flaws in self-measurement.
Examples:
- leaving cash outside performance calculations
- adding money after crashes
- ignoring idle cash
- using only equity returns while excluding bonds/cash
These can create the illusion of outperformance.
5. Risk matters too
One member points out:
Making
+10%
during bull markets means little if
- you lose 40% during bear markets
- or hold individual stocks that never recover.
Returns should always be considered alongside:
- drawdowns
- volatility
- risk-adjusted performance
Position 2: Ignore the benchmark and focus on absolute returns (sohguanh)
This is the minority position but is defended consistently.
Core belief
He argues that:
Instead:
- decide your own return target
- achieve it
- ignore what the index did
For example:
"I want 10%."
If he gets 10%:
Mission accomplished.
He doesn't care if:
- index made 5%
- index made 25%
because that wasn't his objective.
He cites fund managers
He mentions reading mandates from some funds (especially Nikko AM) that emphasise:
instead of benchmarking against an index.
He says this shaped his investment philosophy.
He also invests broadly
His investments include:
- Endowus funds
- Moomoo
- Chocolate Finance USD balances
- other investments
He prefers viewing everything as one overall portfolio return rather than comparing individual holdings against an index.
Counterarguments to sohguanh
Several members strongly disagree.
"Fund managers avoid benchmarks because they lose"
This was probably the strongest criticism.
The argument:
If a manager consistently beat the benchmark...
they would advertise it loudly.
Managers who refuse benchmarking often do so because they cannot outperform after fees.
"Performance needs a reference"
yiwei's response summarises this nicely:
If
You = 10%
Index = 20%
then buying the index would've produced a better outcome.
Therefore comparison remains useful.
Side discussion: Buying the crash
Another interesting debate develops.
View A
Some argue employed people naturally benefit from buying market crashes because they continuously save money.
This isn't "market timing."
It's simply investing new savings during downturns.
View B
Others argue waiting for crashes is dangerous.
Example:
ETF rises
100 → 150
then crashes
150 → 120
Someone waiting for a crash buys at 120.
Someone who invested immediately bought at 100.
Although the second investor bought during a "crash", they still entered at a higher price.
Many studies suggest:
Asset allocation discussion
limster introduces an important nuance.
Rather than comparing:
100% equities
against
100% equity index,
someone with
- 60% equities
- 40% bonds/cash
should benchmark against:
- 60% global equity index
- 40% global bond index
Then crash-buying simply becomes:
- rebalance into equities
- rebalance back later
This is considered a more valid comparison.
Philosophical disagreement
Toward the end, the discussion becomes less about investing and more about forum culture.
limster
People should simply:
- share their methods
- show results
- let readers decide (DYODD)
There are many valid ways to make money.
kickass22
Disagrees.
If poor reasoning isn't challenged, the forum becomes full of misinformation.
Different opinions are welcome, but unsupported claims should be questioned.
sohguanh's final response
He clarifies that he
never claimed index investing is wrong.
Instead, his position is:
He argues that "crap" is subjective—what one investor dismisses, another may find valuable.
Overall assessment
The thread ends without consensus, but the majority of experienced contributors favour
benchmarking. Their main reasons are:
- It provides context for performance.
- It helps determine whether active investing is adding value.
- Academic evidence generally supports benchmarking and passive investing.
- Risk and asset allocation should also be considered, not just raw returns.
The minority view, represented primarily by
sohguanh, advocates
absolute-return investing: set a personal financial target, measure success against that target, and ignore market indices altogether.
In practice, these approaches answer different questions:
- Benchmarking asks: "Am I adding value compared with a simple passive strategy?"
- Absolute-return investing asks: "Am I achieving the financial return I need to meet my personal goals?"
Many investors use both: they set personal financial objectives while still comparing themselves against an appropriate benchmark to understand the opportunity cost of their investment decisions.
