Economists

Yuri Yukuv wrote:

BarrileteCosmico wrote:You guys are crazy. I'm a senior in college studying economics and finance, and I can tell you with 100% certainty that if you believe in the EMH then it is like gambling.

As for this thread if you're interested in making money from the market there is two options. A) invest in the whole market through index funds (note: NOT actively managed funds) B) invest in value. Anything else is a waste of time.

I dont understand why you would not invest in an actively managed funds.

There's a lot of literature about this, very unpopular in Wall Street of course. The main reasons are because a) no actively managed investment funds get consistent results b) when they do make money (relative to the S&P or other indexes) the high management fees eradicate the difference and c) studies have shown that due to the management fees they consistently under-perform the index funds, which means that you're losing money going into them.

Peter Lynch got great results with his mutual fund. It is all about finding a great fund manager IMO...

BarrileteCosmico wrote:

Yuri Yukuv wrote:

BarrileteCosmico wrote:You guys are crazy. I'm a senior in college studying economics and finance, and I can tell you with 100% certainty that if you believe in the EMH then it is like gambling.

As for this thread if you're interested in making money from the market there is two options. A) invest in the whole market through index funds (note: NOT actively managed funds) B) invest in value. Anything else is a waste of time.

I dont understand why you would not invest in an actively managed funds.

There's a lot of literature about this, very unpopular in Wall Street of course. The main reasons are because a) no actively managed investment funds get consistent results b) when they do make money (relative to the S&P or other indexes) the high management fees eradicate the difference and c) studies have shown that due to the management fees they consistently under-perform the index funds, which means that you're losing money going into them.

Yes, I remember these theories in college. However they are much like saying dont ever invest in your own business because most small businesses fail within 5 years (funny enough since the recession this number has fallen to 50%). It has been increasingly hard for active mutual funds to beat the index as market correlation has increased (83% last month if I remember right), but to be honest if you really look at actively managed mutual funds rather than just getting whatever your bank offers you it can be very beneficial.

For example if you are bullish on emerging markets goverment projects around the world you can buy an emerging markets infrastructure funds, if you are right the fund manager will help you do well over bench mark by seperating the good apples from the bad in that category and buying in right valuations and times.

But yes, I think buying a mutual fund that simply buys into the S&P500 by an unknown manager is generally a bad idea.

i think some studies have shown that all you need is like 30% of the index for it to perform very identical to the index (eg high correlation)

if you are ready to put down the time into active investment then it might be worth doing!
But I still believe in EMT and that stocks over time tend to co relate with the GDP...

so right now in uncertain times, it's probably a bad idea to hold long! but when its going up then you can have a more relaxed approach, but of course you need to diversify it, that's why those monkeys made money!

But I feel like america has hit its growth potential and will have more economic cycles, so it is becoming more of a gamble! But then if you got the right information and a little luck you can outplay the market!Because for example right now it's very sensitive to the news that come out. Then look at Bill Miller, the guy who beat the S&P benchmark 14 times in the row, lost in the end!

I think america will go through a lot of de-leveraging processes which will be tough.