mutual funds on average perform worse than the overall market, mainly because they have to deduct their fees from the returns. thus even producing "market returns" means you are actually lower than the market return by the fee--likely 1-3% per year.
I disagree with the last point of course and have explained more than once the rationale. while there is certainly day to day speculation, the vast majority of trading in the public markets is long term investing, and I've given obvious examples of this in the past.
To a certain (high) degree of approximation. The very existence of hedge funds disproves (by countereaxmple) the assumption that information has already been discounted in the stock prices.
I was going to pick a nit on the term "random walk" but I'll refrain. If you're using it in a nontechnical sense there's no nit to pick. "It's the statue, man, The Statue."
wc himself seems to spend a lot of effort looking at the fundamentals and investing according to his best assessment of the "available information", which means he doesn't really believe all information has been discounted, or the two-fund theorem. "It's the statue, man, The Statue."
And even if everyone had the same info, they don't all draw the same conclusions. "everyone knew" that the dollar/euro at $1.35 was just a stopping point on the way to the gutter. Then it traded back in for 2 years.
And also, not everyone is a "guy with reputation". Which is only more to support my claim that the market is not as simple as the guys in mathematical finance need to believe it is so their models are even tractable with a supercomputer. "It's the statue, man, The Statue."
wc himself seems to spend a lot of effort looking at the fundamentals and investing according to his best assessment of the "available information", which means he doesn't really believe all information has been discounted, or the two-fund theorem.
so I look for segments where I think the market has not yet discounted available information, or maybe said another way where the markets for some reason are not closely followed and the random walk theory won't apply, and try to make a little extra money there. (that and the private investments are areas where insight and hard work can give me an edge).
but on calling the big companies, or the overall market trends, I find that I probably lose as much as I win--ie, a random walk. so why not just take the index funds in those areas?
the vast majority of trading in the public markets is long term investing, and I've given obvious examples of this in the past.
I don't think that with a billion shares traded per day one can consider the "vast majority" is for long-term investing. If you mean that individual investors generally aren't day traders then I think you are right.
However even though people may have put their money in mutual funds for the long term this does not mean that the funds are just sitting on the money. My (very conservative) retirement fund has a turnover of over 100% per year. I assume more aggressive funds trade even more frequently.
The point is that the fund always advises participants not to try to time the market and then goes ahead and does it themselves.
Another scam is to quote expenses as a percentage of the capital invested instead of as a percentage of the yield. So a fund with an expense ratio of 1% earning 5% for the year is really taking 20% of the earnings in fees. No wonder Wall Street wants to privatize Social Security. Policies not Politics ---- Daily Landscape
I don't agree with your way of looking at the %'s. but since I use index funds, my expense ratios are very low, so I don't worry about the argument.
