[HN Gopher] Mutual funds that consistently beat the market. Not ...
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Mutual funds that consistently beat the market. Not one of 2,132
Author : elsewhen
Score : 15 points
Date : 2022-12-05 20:03 UTC (2 hours ago)
(HTM) web link (www.nytimes.com)
(TXT) w3m dump (www.nytimes.com)
| ggm wrote:
| Would it not be terrible if this wasn't true? The implications of
| a persisting ahead of market fund are not entirely clear to me,
| but it feels like it's distorting the casino take on the roulette
| wheel.
| adam_arthur wrote:
| There are definitely funds that beat the market over long
| stretches of time.
|
| SCHD beats SPY total returns over the past few years, for
| example. Its an ETF, but could just as well be a passive mutual
| fund. Many CEFs do as well.
|
| Not sure the conclusion drawn here is accurate
| awinder wrote:
| SCHD is a Dow Jones U.S. Dividend 100 Index tracker, that
| example just compares performance of 2 indices. Beating the
| market would refer to a fund (closed/open doesn't really
| matter) that beat its corresponding benchmark.
| maxbond wrote:
| Interestingly, even when a fund does beat the market, their
| investors usually don't. When a fund is really hot people jump
| in, and when that performance turns out not to be reproducible,
| they jump out. This leads to buying high and selling low. And
| sometimes all that money coming in makes the fund really lever
| up, and make a big, big loss. See for example the collapse of
| hedge fund Amaranth Advisors.
| metadat wrote:
| Alternatively:
|
| https://archive.today/Rm7Uz
|
| https://web.archive.org/web/20221205200442/https://www.nytim...
| thecleaner wrote:
| But which market index ? Nasdaq, DJI, DAX, Sensex ? Article is
| paywalled so I can't quite tell.
| maxbond wrote:
| Doesn't look like the index really matters.
|
| > The team selected the 25 percent of the funds with the best
| performance over the 12 months through June 2018. Then the
| analysts asked how many of those funds remained in the top
| quarter for the four succeeding 12-month periods through June
| 2022.
|
| > The answer was none.
|
| So it's more that being a top-performing fund in one year
| doesn't predict you'll be a top-performing fund in the next. 2k
| is a pretty significant sample size (though it's functionally
| less since many are tracking the same benchmarks & so should be
| highly correlated), large enough that we should anticipate dumb
| luck.
| nescioquid wrote:
| Also can't access the story, but it seems safe to assume there
| are no funds that beat any index, no? The headline mentions the
| market, so if there were at least one fund that beat at least
| one of the market indices, it would seem difficult to maintain
| the claim.
|
| Or are you responding to the blurb before the paywall?
|
| > No actively managed stock or bond funds outperformed the
| market convincingly and regularly over the last five years.
| Index funds have generally been better.
|
| So index funds have generally done better than managed funds in
| a consistent way. It might be more interesting to know which
| managed funds (if any) did better than an index fund, but I'm
| guessing the real purpose of the article is to suggest you may
| as well just buy the index funds.
| maxbond wrote:
| Non-paywalled:
|
| https://web.archive.org/web/20221205200442/https://www.nytim...
| halpmeh wrote:
| Berkshire Hathaway has beaten the market over the last 5 year.
| They're basically a mutual fund combined with a private equity
| firm.
|
| But it seems like the criteria used is a bit weird:
|
| > The team selected the 25 percent of the funds with the best
| performance over the 12 months through June 2018. Then the
| analysts asked how many of those funds remained in the top
| quarter for the four succeeding 12-month periods through June
| 2022.
|
| That's different than not beating the market.
|
| > And over a full 20-year period ending last December, fewer than
| 10 percent of active U.S. stock funds managed to beat their
| benchmarks.
|
| So some firms do beat the market.
| Dylan16807 wrote:
| It's really easy to have funds that beat the market over X
| years if you only measure them once at the end of those years.
|
| Here's a trivial recipe: Gamble 20% of the money on a single
| roulette spin. Then invest everything in the overall market.
| (Yeah, technically you want the closest stock equivalent. Easy
| enough.)
|
| The challenge is to consistently beat the market. To prove you
| didn't just get lucky on a handful of bets. For that, the
| criteria isn't weird at all. They're checking if a _series_ of
| bets on a fund would have mostly or all been successful.
| maxbond wrote:
| If some firms beat their benchmarks, but no firm is
| consistently in the top bracket, don't you think that suggests
| it's noise?
| halpmeh wrote:
| They say later on that some firms do beat their benchmark
| over a 20 year period, so I don't think it's just noise.
| maxbond wrote:
| You mean this part?
|
| > Some actively managed funds did better than the overall
| market over the last 15 or 20 years. Though they were
| unable to do so consistently year after year, they had good
| stretches, and those periods were strong enough to make
| them outperform over the entire span. Such funds may well
| be worth owning.
|
| > "Those that have managed to do that are impressive," Mr.
| Edwards said. "But which funds will be able to do it over
| the next 20 years?" Unfortunately, we don't know.
|
| If you owned that fund _for 20 years_ you 'd beat the
| benchmark. If you missed a few crucial moments - you
| wouldn't. It's really easy to get into the fund after a
| good year and leave after a bad year. The risk required for
| those big gains also sometimes results in big losses.
|
| Other times funds cheat, like Renaissance. They certainly
| had lots of quantitative innovations, but a huge part of
| their advantage was not paying their taxes. They settled
| with the IRS for _7 billion dollars_.
|
| For the record, I don't think literally all funds doing
| well is noise, but the evidence seems to consistently bear
| out that most of the time it is.
| SideQuark wrote:
| >but a huge part of their advantage was not paying their
| taxes. They settled with the IRS for 7 billion dollars.
|
| And that 7B is past taxes, interest, and penalties. They
| returned 66% annualized before fees and 39% after fees
| over a 30 year span, 1988 to 2018. Renaissance also has
| grown to over $130B.
|
| It also was not tied to many of their funds - it was only
| from (if I recall) a single fund. The others are not
| under IRS investigation (AFAIK)
|
| So the 7B is no where near enough of a cheat to allow
| this kind of return. You can view the 7B as evidence that
| the fun returned incredible returns to investors, so much
| so, that missed taxes on the profits were 7B.
| mitt_romney_12 wrote:
| In an interesting side note, even Warren Buffet (the manager of
| Berkshire Hathaway) is a proponent of index funds. He made a $1
| million bet in 2008 that and index fund tracking the S&P 500
| could beat a hedge fund portfolio over the next 10 years, which
| he ended up winning in 2017.
|
| Source:
| https://www.investopedia.com/articles/investing/030916/buffe...
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