Re: Evaluating Managed Funds
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there is no one that can pick stocks and beat the benchmark over a long period of time
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Oh, please.*
* I'm not saying it's easy, I'm just saying that all tautologies are false [img]/images/graemlins/wink.gif[/img] and there's a lot of data that contradict you/Fama/French/Malkiel/Samuelson/.....
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Ok, maybe the stock market is less than 100% efficient, and it is possible for a few active managers to outperform their benchmark over a long period of time. However, by the time you have enough years of data to see they are truly skilled and not just lucky, they'll be retired. And if you are trying to find those managers before they have all of the necessary data, you could be wrong and underperorm the benchmark.
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Take 1000 fund managers and put them in a room. Ask them to flip a coin and try to get heads....
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Have you read The Superinvestors speech?
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I just looked it up. I'll look at it in more detail later. However, it looks like Graham and Dodd are into deep value, right? Great. I like deep value as well. The Fama/French research from 1992- shows that deep value outperforms the market over long periods of time, and I recommend a deep value tilt. When looking at the past performance W. Buffett mentions, is there still positive alpha after evaluating on the 3-factor model?
The average compound annual return from 1927 to 2004 is:
10.4% S&P 500 Index
11.4% US Large Cap Value Stocks
-Tom
P.S. Didn't W. Buffett say that most investors would be better off in index funds during a shareholder letter in the 90s?
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