[pig4bill]

[ QUOTE ]
I guess I disagree with you Barron about the necessity of believing that the market is efficient or it isn't. I see a continuum of efficiency from non-existent to strong. I tend to belive that the market is more efficient than it is generally creditted to be. I part from you in believing that there are massive inefficiencies. I think these are largely identified in hindsight.

I guess the reason I argue these things can be distilled to a couple of things that you can see on this board. One in fact is in this very thread.

First, I am battling claims from people who claim to 'beat the market', and usually claim to do so rather easily. I feel confident that the vast majority of those people don't have:

Any clue what market they are beating, or are not comparing their investments to the appropriate index. They almost always mean they achieved a return that exceeded the S+P 500.

No records to support their performance record.

Insufficient length of time to demonstrate that their positive risk adjusted returns are anything more than randomness. This is really the biggest one. For a trading strategy to prove itself it has to persist over several market cycles. I always feel foolish explaining this to poker players who accept that you need X amount of hands to show your true win rate, yet believe that two years of investing data is sufficient.

Finally, I argue about this because I am appalled by the lousy and contradictory advice most people get when they seek it. Investing successfully is really very simple. There are thousands of high cost products created and marketted to obscure that simplicity. Quite simply, the vast majority of people would fare best with a properly diversified and allocated portfolio of index, or very low cost actively managed mutual funds that are invested in a way consistent with their goals and risk tolerance. Basically, go to the Vanguard website answer some questions and you will achieve performance that is far better than your peers.

There is another tangent I have been thinking about and I think I will follow up in another thread if there is interest, but I think some of the things poker players learn helps them be better investors, and some things really hurt them. I think one of the most detrimental ideas is that to be a successful investor you have to win. In poker there must be a loser for every winner (in fact several losers for every winner). As an investor you don't need to be smarter than the crowd. The rake is on your side and the more effort you apply to winning the worse you are likely to do.

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This attitude just strikes me as flat-out lazy. "Nobody can beat the market, so why should I put out the effort?". If you think the market cannot be beaten, by a wide margin, your depth of knowledge is very shallow. You haven't tried to find out anything about the subject beyond a couple posts here and maybe reading a book that supports your conclusion, possibly written by someone just as lazy. Or looked towards academia, who are the laziest of all. "Wow, I just spent four hours googling. I'm wiped out". Put some effort into finding successful traders and you will find them.

BTW, statements like this: "For a trading strategy to prove itself it has to persist over several market cycles." are really silly. Who's going to be stupid enough to use the same strategy in a bull market as a bear meket? Who's going to use the same strategy in a low-volatility market as a high-volatility market? Not someone successful. Do you play the same way at every poker table, regardless of who's there, or the stakes?