Author Topic: I have given up value investing  (Read 14391 times)

Jurgis

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Re: I have given up value investing
« Reply #40 on: January 17, 2019, 10:30:19 AM »
This has been said every year for the last 7 years or so.

Others may have said so, but definitely not me!

Anyway, here are my two reasons why I believe what I said:

One is, there are mechanical reasons why (classical/quantitative/mechanical) value investing tends to underperform when interest rates go down in a big way [1].  And interest rates are now starting to go up.

Two, broad market indices like the S&P are now priced at a level where itís pretty unrealistic to expect great future returns over, say, the next 10+ years [2, 3].  I donít think thatís true at the moment for many individual stocks.

Well, we'll see. But I think it is a common fallacy to say that active investing will do better this time or that time or based on this factor or whatever. You may not have said anything like that earlier and maybe you gonna be the person who picks the (passive investing) top this time, but I would not bet on you or anyone doing it consistently. I've seen too much claims that have been made that were total bunk and the same people come over year(s) later and make new claims without acknowledging that they were wrong and that they are just making WAGs. And not only CoBF people. We can pick on professional investors doing the same.

It has been shown that a large majority of active investors underperform long term whatever the factors are. And expecting this to change is wishful thinking IMO.

Of course, you can always cherry pick data like Spekulatius did and show how index did really poorly from some market top that is known only post-factum.

Anyway, we all know that CoBF investors are special (TM) and  they outperform (TM).
« Last Edit: January 17, 2019, 10:37:37 AM by Jurgis »
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SHDL

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Re: I have given up value investing
« Reply #41 on: January 17, 2019, 10:36:06 AM »
Yes, we'll see.  I'm happy to bet $5 that Berkshire will outperform (TM) the S&P over the next 10-20 years. 

Jurgis

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Re: I have given up value investing
« Reply #42 on: January 17, 2019, 10:39:43 AM »
Yes, we'll see.  I'm happy to bet $5 that Berkshire will outperform (TM) the S&P over the next 10-20 years.

I'll take that bet.

But since I take that bet I'll also observe the tendency of value investors to use BRK and Buffett as a crutch. I.e. Buffett is the only example that consistently outperformed and a lot of other investors performance is based on holding large BRK positions. You may not be doing this in your portfolio, but your bet totally falls into that category.
« Last Edit: January 17, 2019, 10:47:41 AM by Jurgis »
"Before you can be rich, you must be poor." - Nef Anyo
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SHDL

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Re: I have given up value investing
« Reply #43 on: January 17, 2019, 10:48:23 AM »
Okay, let's revisit this thread on 1/17/2029.  ;)

mikazo

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Re: I have given up value investing
« Reply #44 on: January 17, 2019, 11:56:42 AM »
I decided a few months ago to transition away from value investing and toward index investing. I simply don't have the time required to research value ideas. It makes me feel better to see others have come to the same realization.

mwtorock

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Re: I have given up value investing
« Reply #45 on: January 17, 2019, 12:11:39 PM »
Seen some comments about indexing and somehow imply that is passive investing. I think there is a huge difference. Indexing is a tool that you can use for passive investing. How many of you or the people you know actually gone through market cycles without getting in or out index funds? Ask all the equity fund outflows in december 2018 - it is pretty hard.

If you try to get in or out of markets using index funds, to me it is not really passive investing. Real passive investing like buying BRK for years and not selling is very very hard.

Jurgis

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Re: I have given up value investing
« Reply #46 on: January 17, 2019, 12:27:11 PM »
Seen some comments about indexing and somehow imply that is passive investing. I think there is a huge difference. Indexing is a tool that you can use for passive investing. How many of you or the people you know actually gone through market cycles without getting in or out index funds? Ask all the equity fund outflows in december 2018 - it is pretty hard.

If you try to get in or out of markets using index funds, to me it is not really passive investing. Real passive investing like buying BRK for years and not selling is very very hard.

IDK what's so hard. I have my 401(k) at fixed allocation and I haven't changed the allocation/contribution/etc for X years I have been in current job. And BTW my allocation is OKish, but not great. It includes 20% bonds and 40%/40% US/international funds. And international funds have returned way less than US market index funds. (I should rebalance, but I don't, since I treat this more of an experiment of what the end result will be with fixed allocation).

But yeah, there's a lot of people who just don't do it. Even worse, they don't do anything. Like missing 100% gains that they could get by just doing X% contribution into 401(k) and getting X% company match (yeah that's 100% gain immediately). Or missing on guaranteed Y% gains by buying Y%-discounted ESPPs.

Anyway, sorry that's kinda OT.
"Before you can be rich, you must be poor." - Nef Anyo
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CorpRaider

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Re: I have given up value investing
« Reply #47 on: January 17, 2019, 06:28:13 PM »
A "technical heavy approach" sounds much worse than value investing and much, much, much worse than indexing.  I brought in the index thing (sorry, as it seems to have derailed the thread).  Unless he's just talking about systematic trend following using cheap index products in a tax advantaged account or something.  In any case, best of luck.

cherzeca

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Re: I have given up value investing
« Reply #48 on: January 17, 2019, 06:55:32 PM »
investing is simple, but it isn't easy...in fact, it is damn hard to do well.  muscleman gets it.  all best

rkbabang

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Re: I have given up value investing
« Reply #49 on: January 18, 2019, 09:59:47 AM »
Best of luck to muscleman, but to me this feels like exactly the wrong time to give up on active value investing...

This has been said every year for the last 7 years or so.

It also has been claimed that value investors will outperform when market goes down.
Which has pretty much shown to be wrong in the years like 2018 when market went down.
(Yeah, I know there's a ton of superinvestors on CoBF who outperform every year. More power to them.)

I disagree that value investors, as a group, largely outperform on years when the market goes way down.  When fear dominates it causes a sinking tide which lowers all boats (for the most part).  But value investors start buying when everyone else is selling, so they do outperform when the market goes back up.  By the time everyone else starts pouring money into the market in a big way you are more than halfway to the next top.