# Alternatives to Couch Potato?



## wwwater (May 28, 2009)

I am in my early 30s and I have a high risk tolerance, I have the patience to stick with a plan, provided that it works.

I agree indexing is a cost efficient way to reduce the investment expenses and pocket most of the investment growth; however, I am having second thoughts after seeing the statistics posted on the Couch Potatoes website:

http://canadiancouchpotato.com/wp-content/uploads/2012/08/CCP_Model_Portfolio_Performance.pdf

With the "Complete Couch Potato" plan, the ROI averaged over the past 15 years is close to 7%, others 2 plans have lower returns.

I must say it is not bad already to produce this kind of return without active managing and little effort. However, for someone like myself who is willing to put in a bit more time and go after a higher annual return, say 7-10%, where do I start? Should I start indexing on selected sectors, removing the fixed income portion of the couch potato and go entirely equity, or doing the couch potato as well as stock picking?

Thoughts?


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## leoc2 (Dec 28, 2010)

Many here carry the battle scars of active management. It is very rewarding and time consuming. My recommendation is core and explore. Put a half in couch potato and the active manage the other half. Asset allocation determines the risk tolerance and volatility of your investments. Good luck.


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## andrewf (Mar 1, 2010)

Evidence suggests you can spend arbitrary amounts of time and not generate any extra return.

That is to say that 'couch potato' investing isn't just for people who are lazy or can't be bothered, but even for those who are willing to spend large amounts of time. This is true because active management, on average, provides no return benefit (aka 'alpha'), and generally increases costs.

One way to increase returns, then, is to take more risk.


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## doctrine (Sep 30, 2011)

Long term returns of equities is approximately 7% plus inflation, thus about 10% nominally. No one can really expect to exceed 10% nominal returns for an extended period of time. But 10% returns have been achievable for long term investors over long periods of time. You aren't going to get anywhere near that now with a couch potato portfolio that includes bonds paying 2-3%. I would suggest that what you are looking for is a pure equity portfolio, either through ETFs or individual stocks. However, the risk is higher. In my opinion, as someone who is building capital, bring on risk; a 30% market correction would be a great buying opportunity.


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## Sampson (Apr 3, 2009)

andrewf said:


> One way to increase returns, then, is to take more risk.


This only affords the opportunity to have greater returns, and can also result in much lower returns.


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## Argonaut (Dec 7, 2010)

Curious as to when andrewf became a born-again indexer who says nobody can beat the market? Was it after his XIV holding got crushed in August 2011? If he can't beat the index, no one can. Or perhaps he deftly traded in and out of it, thus becoming what he preaches against? Not trolling, just curious.

To the OP: Outperforming the couch potato is very possible. The catch is you have to be genuinely interested in following the markets, willing to spend a lot of time researching and analyzing, and you have to have some knack for it. If these things don't apply, couch potato may be for you.


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## scomac (Aug 22, 2009)

doctrine said:


> Long term returns of equities is approximately 7% plus inflation, thus about 10% nominally. No one can really expect to exceed 10% nominal returns for an extended period of time. But 10% returns have been achievable for long term investors over long periods of time. You aren't going to get anywhere near that now with a couch potato portfolio that includes bonds paying 2-3%. I would suggest that what you are looking for is a pure equity portfolio, either through ETFs or individual stocks. However, the risk is higher.


If you invest in the total market, you will get the return of the total market (minus your costs). This part is indisputable! The only way to get above market returns is to attempt to pick. With that choice comes the risk of getting less than the total market -- also indisputable. All equity portfolios aren't necessarily the answer either because when you are fully invested in equities, you have lost the ability to rebalance during a market correction/crash. This is the rational for recommending a minimum of 25% fixed income (a la Ben Graham) so as to afford the opportunity to rebalance. You might suggest that you will do this via employment earnings, but if you don't have any free cash sitting around, you won't be able to earn it fast enough to make the difference. The concept of multiple assets that simultaneously reduce risk and increase return is illustrated in this 
Efficient Frontier graph that was popularized by Markowitz:


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## namelessone (Sep 28, 2012)

@wwwater

What I suggest to you is the ideas from Benjamin Graham+Charlie Munger. You learn what investing is about from Benjamin Graham. Charlie Munger is the man behind Warren Buffett. 
You won't do too bad with that combo. I just realized that after 5 years of learning. My annual return of the past 5 years is around 6~7% vs the index's 2% or Complete Couch Potato's 3%. 
I was only using value approach. After adding Munger's idea, it'll give it a bigger boost. On top of that, my portfolio is less volatile than the index.

Active trading doesn't necessarily translate into higher return but inteligent selection does give higher return. 
The simple reason is there're businesses that are more profitable than the average.


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## andrewf (Mar 1, 2010)

Argonaut said:


> Curious as to when andrewf became a born-again indexer who says nobody can beat the market? Was it after his XIV holding got crushed in August 2011? If he can't beat the index, no one can. Or perhaps he deftly traded in and out of it, thus becoming what he preaches against? Not trolling, just curious.
> 
> To the OP: Outperforming the couch potato is very possible. The catch is you have to be genuinely interested in following the markets, willing to spend a lot of time researching and analyzing, and you have to have some knack for it. If these things don't apply, couch potato may be for you.



Somewhat off-topic, but sure.

I still have XIV. I was a bit overzealous in 2011, and my avg cost by the end of 2011 was 9.17 (so yes, there definitely was a big drawdown). 2012 made up for it though, and I have trimmed my XIV position through 2012. I do this with a small part of my portfolio and expect it not to outperform stocks *on a risk-adjusted basis*. If you look back, I also mentioned some VXX puts that I put on in Jan 2012. On the whole 2012 has been a good year to be short volatility. I'm not convinced that the risk is worth it, nor would I recommend anyone else to dabble in this. I would also note that this is not something that requires a lot of time, and spending more time doing it would not increase my returns. 

My point on active management is that on average, active investing adds no value. This is because alpha is zero sum. Unless you think you are above average... Alpha is hard to earn consistently. There is evidence to support value and momentum factors, but these can be achieved through low-cost indexing and without high levels of portfolio turnover. And alpha generated from these strategies strictly comes at the expense of other active investors.

~ 85% of my portfolio is index ETFs and shares of my employer (share ownership program that I trim periodically).


And having the 'knack' for outperforming couch potato is not something you can know, a priori. Just like 90% of people think they are above average drivers, I'm sure more than 50% of people think they are above average investors. This includes a large body of pro investors, and they have a very difficult time generating alpha.

I read an article a while ago about a study on Buffet. Apparently his returns can be explained through a combination of low cost leverage (from his insurance business) and value investing. The trick for the avg investor is low cost leverage. Anyone can buy a value fund. Neither require hundreds of hours of stock research...

Now, if you like to do research as a hobby and can keep your costs low, I have no doubt you can match the performance of the market, on average. I don't think your returns will be well correlated with how much research you do (monkey throwing darts stock picking strategy). I prefer to read a book.


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## Argonaut (Dec 7, 2010)

There is theory and there is practice. Individuals with consistent outperformance do exist, here and elsewhere, and it is more of an achieveable goal than you make it out to be. And you don't have to frequently trade either; in fact with low commissions nowadays many stockpickers will pay less in fees than indexers by virtue of the latter's MERs. Stockpicking does not necessarily equal high turnover.

As an aside, in theory I'd rather sell VXX calls than buy puts. That way you're selling both premium and volatility. But in practice, this could blow up in one's face.


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## fatcat (Nov 11, 2009)

andrewf said:


> My point on active management is that on average, active investing adds no value. This is because alpha is zero sum. Unless you think you are above average... Alpha is hard to earn consistently. There is evidence to support value and momentum factors, but these can be achieved through low-cost indexing and without high levels of portfolio turnover. And alpha generated from these strategies strictly comes at the expense of other active investors.
> 
> ~ 85% of my portfolio is index ETFs and shares of my employer (share ownership program that I trim periodically).
> 
> ...


 +1 from me ... 



> *argo said:* Individuals with consistent outperformance do exist, here and elsewhere


who and for how long ? ... sure, all kinds of people outperform the market for x periods of time ... but eventually the market wins .. it's all about time ... none of this makes any sense unless you define your time horizon ... the OP will be investing for the next 40 years ... if he can beat the market over that time period he needs to get himself in the equities business because he's wasting his time doing whatever he is doing now


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## andrewf (Mar 1, 2010)

Writing VXX calls requires more capital to ride out margin calls, and that risk is very truly eliminated. Long puts have a fixed, manageable risk. Also, you can buy puts in a registered account.

Also, being short VXX is a roundabout way of selling option premium. Using a put on VXX is like reinsurance...


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## Belguy (May 24, 2010)

It's all too deep for me because I am a simple man. I have zero interest in research and statistical analysis as there are many other things that I prefer to do with my time.

That is why I am a 'Couch Potato' investor. Know yourself.


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## slacker (Mar 8, 2010)

Argo created a straw man.


1. Andrew claims "active management, on average, provides no return benefit"

2. Argo distorts Andrew's claim in #1 with "(Andrew) says nobody can beat the market"

3. Argo attacks the distorted claim #2 with "Outperforming the couch potato is very possible", and conclude Andrew's claim #1 is without merit


Just a argument nerd...


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## andrewf (Mar 1, 2010)

I was being polite. Claim 1 above got me called a vile, awful, despicable human being a couple weeks ago, so I thought Argo was being pretty mild.


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## Argonaut (Dec 7, 2010)

When a child expresses interest in playing a sport, should we say, "On average, kids do not make it to higher level in sport. Instead, spend your time on general exercise." Or if a teenager wishes to become a doctor, should we tell them, "On average, students flunk out before they complete Med school, so go take general courses at the community college instead." The OP expressed interest in outperforming, so rather than sending him directly to the couch, I would nurture this ambition.

The acceptance of mediocrity is a strange concept to grasp; yet many seem to embrace it, even worship it as a mantra of sorts.


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## slacker (Mar 8, 2010)

Agreed, that there is a certain cult like following with the whole passive/couch style of investing, at least as far as it pertains to a minority of couch advocates. The efficient market theory always seem overstated to me.

PS: I am a complete couch potato portfolio though, doesn't mean I don't notice the oddity around it's "believers".


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## slacker (Mar 8, 2010)

Argonaut said:


> When a child expresses interest in playing a sport, should we say, "On average, kids do not make it to higher level in sport. Instead, spend your time on general exercise." Or if a teenager wishes to become a doctor, should we tell them, "On average, students flunk out before they complete Med school, so go take general courses at the community college instead." The OP expressed interest in outperforming, so rather than sending him directly to the couch, I would nurture this ambition.
> 
> The acceptance of mediocrity is a strange concept to grasp; yet many seem to embrace it, even worship it as a mantra of sorts.



Ah, now you are shifting the goal post from "active generates alpha" to "we should strive to be better than average".



PS: don't mind me, just picking arguments.


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## andrewf (Mar 1, 2010)

Argonaut said:


> When a child expresses interest in playing a sport, should we say, "On average, kids do not make it to higher level in sport. Instead, spend your time on general exercise." Or if a teenager wishes to become a doctor, should we tell them, "On average, students flunk out before they complete Med school, so go take general courses at the community college instead." The OP expressed interest in outperforming, so rather than sending him directly to the couch, I would nurture this ambition.
> 
> The acceptance of mediocrity is a strange concept to grasp; yet many seem to embrace it, even worship it as a mantra of sorts.


Fair enough. OP can hear both sides and make that determination for his/herself.

But while we're making analogies, we can also say that why bother with investing--just go to the casino and put it all on black. Sure, the expected value is negative, but you might get lucky and walk away rich.


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## andrewf (Mar 1, 2010)

Also, education is not zero sum. If you become more educated, it does not mean someone, somewhere must become less educated. Encouraging more people to pursue their education grows the pie of human capital. Encourage active investing doesn't grow the pie. If anything, some crumbs fall on the floor and get wasted. That's not to say that some people won't end up with bigger slices than average.


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## namelessone (Sep 28, 2012)

andrewf said:


> Also, education is not zero sum. If you become more educated, it does not mean someone, somewhere must become less educated. Encouraging more people to pursue their education grows the pie of human capital. Encourage active investing doesn't grow the pie. If anything, some crumbs fall on the floor and get wasted. That's not to say that some people won't end up with bigger slices than average.


Active in what? Transactional activity? Or learning? I am always active, in learning but my stocks holding rarely change. I already spent the time to find them. I'll try to keep them as long as they're still profitable businesses. Most of my holdings were profitable businesses during the 08-09 financial melt down.

If you meant active in trading, then I agree day traders are profiting from other day traders. This case is zero sum game. 
However, day traders can not profit from buy and holders. Buy and holders buy on fundamentals. So if day traders only hold the stock for a fraction of secs. They're not benefiting from the continue rise of business profit but buy and holders do. In this case, there's only opportunity cost.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> Also, education is not zero sum. If you become more educated, it does not mean someone, somewhere must become less educated. Encouraging more people to pursue their education grows the pie of human capital.


Well, it is a zero/sum game in a way - because available productive jobs are limited.
While education (as in obtaining degrees and diplomas) may not be a zero/sum game per se, the number of available jobs provides an upper cap to validity of education.

In a perfect job market, more number of qualified job seekers (doctors, or whatever) ought to drive down the compensation in that profession.
But we don't have a perfect job market because of many reasons (professional societies, artificial barriers to entry, unions, etc.)

The result is a glut of taxi drivers with PhD.s and qualified doctors working as lab technicians.

In a free market, the cost of education should rise to price out the extra supply from the market.

Because of limited natural resources and GDP expansion constraints, pretty much any kind of labor or capital allocation is a zero/sum game.


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## thenegotiator (May 23, 2012)

Harold and all
just for the sake of fun I will quote the FATCAT opinion:biggrin:

see post #14
i recommended dreamcatcher in the first at santa anita
----------------------
1st race - Santa Anita Park - Sunday, January 06, 2013

Off at: 12:31 Race Type: Allowance Optional Claiming Video Race Replay
Age Restriction: Four Year Old and Upward
Purse: $60,000
Distance: One And One Fourth Miles On The Turf
Track Condition: Firm
Winning Time: 1:59.47
Pgm Horse Jockey Win Place Show
2 All Squared Away Garrett K. Gomez 7.60 3.60 2.60
7 Fire With Fire Martin Garcia 3.20 2.40
5 Dreamcatcher Joseph Talamo 2.40
Also ran: 3 - Shaun Washington , 4 - Surrey Star (IRE) , 6 - Romp (ARG) , 1 - Sebastian Flyte (GB)
-----------------------------------------

he ran third and paid $2.40

that's an annualized return 7300%

which, on a 100K returns $7,300,000

i'm just sayin, don't overlook the ponies


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## andrewf (Mar 1, 2010)

HaroldCrump said:


> Well, it is a zero/sum game in a way - because available productive jobs are limited.
> While education (as in obtaining degrees and diplomas) may not be a zero/sum game per se, the number of available jobs provides an upper cap to validity of education.
> 
> In a perfect job market, more number of qualified job seekers (doctors, or whatever) ought to drive down the compensation in that profession.
> ...


That's the lump of labour fallacy. There isn't a fixed number of jobs.


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## kcowan (Jul 1, 2010)

The inherent inefficiency of the fund market works against it. When the market is buoyant and increasing, new money is flowing into the funds and they are under pressure to invest this money asap. When the market turn around into a decline, the investors demand redemptions, and the fund manager is forced to sell their holdings into a declining market in order to pay their investors money back.

Individual investors have no such constraints. They can buy stocks when their prices are declining. They can hold stocks during market troughs. They can cherry pick stocks rather than hold a broad base in a sector.

These differences give individual investors an inherent advantage. They also don't have any pressure to sell to new participants so their overheads might be lower. 

These structural advantages can easily be blown by poor choices, hanging on to losers and a litany of other factors that they share with fund managers. YMMV
Keith


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> That's the lump of labour fallacy. There isn't a fixed number of jobs.


Tell that to the Europeans 

Anyhow, my point was about education, and why it is a zero/sum game in the context of the larger economy.
There _is_ a social cost to education - both in terms of labor and capital.
Virtually every type of activity (even _thenegotiator_'s horse racing, is an allocation of labor and capital.

When labor and capital is allocated to education, it is at the expense of other activities.
If such education does not produce productive jobs (i.e. causes under-employment or hidden unemployment), then it is not an efficient allocation of labor and capital.

We have neither unlimited labor nor capital (Robbins' unlimited ends and scarce means).

Even if we assume that labor is conceptually unlimited, capital and other resources are limited.

_"The material means of achieving ends are limited. We have been turned out of Paradise. We have neither eternal life nor unlimited means of gratification. Everywhere we turn, if we choose one thing we must relinquish others which, in different circumstances, we wish not to have relinquished. Scarcity of means to satisfy ends of varying importance is an almost ubiquitous condition of human behaviour"_

-Source


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## andrewf (Mar 1, 2010)

Education is more about productivity than actual quantity of labour available. We've become progressively more productive over the past few centuries, and we don't see that showing up as higher unemployment, but rising incomes.

But it's the same thing with supply of labour. People use it as an argument against immigration. But when immigrants bring supply (labour), they also bring demand (food, housing, services, consumption goods).


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## Jungle (Feb 17, 2010)

For me, in the accumulation phase, it's not about potential that I could outperform the market; it's more about the risk of underperforming. 

It's a risk I'm not willing to take. In some cases, investors are not rewarded by taking more risk. Long and steady wins the race. 

I have picked stocks in the past (and still hold them) and learned a little luck was on my side. Right time and right place shall I say? I can't count on this going forward as a sensible retirement strategy. I don't know where individual stock prices will go, other than vaguely say "up" over a long period of time. Then again, they can also go bankrupt and decrease in price. 

Remember a couple of bad stock picks can really screw up your % and since time and the markets move forward, you can't really go back to get the returns you underperformed.


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## Toronto.gal (Jan 8, 2010)

namelessone said:


> 1. day traders can not profit from buy and holders. Buy and holders buy on fundamentals.
> 2. So if day traders only hold the stock for a fraction of secs. They're not benefiting from the continue rise....


*1.* I agree x2!
*2.* I do benefit, as profits made from trading same or other stock, go directly to the increase of long-term positions. Another words, most times, I do not trade {sell} to get rid of the stock, on the contrary, I'm increasing it as a result.

Short-term strategies play a key role as well, especially in times of high volatility.


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> But it's the same thing with supply of labour. People use it as an argument against immigration. But when immigrants bring supply (labour), they also bring demand (food, housing, services, consumption goods).


Yes, that is the lump of labor fallacy, but I am not saying that.
In aggregate, education is also a zero/sum game because having more of it means having less of something else.

If it were not so, there would be infinite expansion in productivity and GDP across the world.
Anything that requires allocation of labor and/or capital is a zero sum game.


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## andrewf (Mar 1, 2010)

I'm not sure I follow where you're going Harold, but I think it's a separate point.


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## namelessone (Sep 28, 2012)

Buying on the dip is different than day trading where short term trend does not depend on long term business profit.
Swing trade is in between day trading and long term holding. I do bit of swing trade but not day trade.
I had a few lucky swing trade that reduced my RY cost to zero.
(*correction:I just looked up wiki. Swing trade spans just a few days. Mine was few months span so by definition those are not swing trades.)

My whole point above is day traders profit is other day trader's direct loss.
A profitable business long term owner 's profit is from the product and service provided to their customers.



Toronto.gal said:


> *1.* I agree x2!
> *2.* I do benefit, as profits made from trading same or other stock, go directly to the increase of long-term positions. Another words, most times, I do not trade {sell} to get rid of the stock, on the contrary, I'm increasing it as a result.
> 
> Short-term strategies play a key role as well, especially in times of high volatility.


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## Toronto.gal (Jan 8, 2010)

namelessone said:


> 1. Buying on the dip is different than day trading where short term trend does not depend on long term business profit.
> 2. I had a few lucky swing trade that reduced my RY cost to zero.
> 3. day traders profit is other day trader's direct loss.


*1.* I partially disagree, but I'll leave it at that.
*2.* That's how it's done, and with so much volatility, you need less than luck to be able to pull a few successful swing-trades [or multi same-day trades!].
*3.* Of course! If someone wins, someone has to lose [realized or not] and vice-versa.


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## fatcat (Nov 11, 2009)

it is very hard to measure capital investment in education
there are kinds of hidden benefits like socialization which means better health and less crime

the biggest hidden benefit is that it nurtures creativity which can advance us by leaps and bounds

educated people are likely to have the tools to think more creatively and this just cannot be measured


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## HaroldCrump (Jun 10, 2009)

andrewf said:


> I'm not sure I follow where you're going Harold, but I think it's a separate point.


I was responding to your statement above that : _education is not zero sum. If you become more educated, it does not mean someone, somewhere must become less educated_.
My counter-point was that education is also a zero/sum game for society as a whole.
One person becoming more educated means that some amount of labor and capital has been directed towards that, which means _something else_ did not get done.

And if that education did not yield full results through productive employment (i.e. en-cashing the human capital), then it was not an efficient allocation of resources.

In lieu of that, someone else could have become more educated, or something else could have been done (like a new oil well dug up, or a new casino been built for our friend _thenegotiator_)


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## Dibs (May 26, 2011)

Okay, this went off topic very fast!

I think andrewf hit the nail on the head in his first post:



andrewf said:


> One way to increase returns, then, is to take more risk.


If you want more returns, you have to take on more risk. 

An index strategy lowers risk by investing in the total stock market. A stock picking strategy takes on more risk by picking a portfolio of stocks among the market. Of course the stock picking strategy will give higher returns (and lower lows) because you take on more risk. It does not make sense to compare the returns of an index strategy with a stock picking strategy without comparing the risk of the two.

I would also recommend a leoc2's "core and explore" strategy if you are starting out.


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## Eclectic12 (Oct 20, 2010)

fatcat said:


> ...the biggest hidden benefit is that it nurtures creativity which can advance us by leaps and bounds
> educated people are likely to have the tools to think more creatively and this just cannot be measured


I'm not sure how widely true this is ... certainly a lot of the junk I experienced in university had more to do with "playing the game" than creativity.

For example, for one prof, violating any of thirty-five rules such as using pen instead of pencil to write the assignment or stapling the assignment pages out of order resulted in a five percent deduction of marks earned. 


I pretty much was discouraged from creativity, unless it fit in a neat little box.


Cheers


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## Eclectic12 (Oct 20, 2010)

Dibs said:


> ...If you want more returns, you have to take on more risk...


I disagree. 

A good chunk of my best returns have come from calculated risks where I've recognised when the market is overdoing the down side. In those cases, whole sectors - if not the market itself were discounted heavily - putting more cash in quality companies at that time, basically worked across the board.


Is that really more risk than those who bought the same company six months earlier for 30% to 100% more?


Cheers


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## andrewf (Mar 1, 2010)

I worded that carefully. There are ways to increase returns by taking more risk. Ie, using leverage.


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## Toronto.gal (Jan 8, 2010)

Eclectic12 said:


> 1. certainly a lot of the junk I experienced in university had more to do with "playing the game" than creativity.
> 2. I pretty much was discouraged from creativity, unless it fit in a neat little box.


*1.* I don't like to read junk & university side by side. :frown:

You can't fully teach creativity nor expect such a thing; part of it is natural & self-taught as well. Take any brilliant mind around [past or present], or famous high-school dropouts, and tell me whether their innovation was all due to schooling? As an example, do you think that Zuckerberg learned everything he knows at Harvard? He probably had taught himself most of it before he even entered university.

Creativity is actually an ability/activity that helps many with independent thinking & innovation. Motivation is a key aspect of a creative mind, which enriches the person & gives room for other important life skills, like problem solving as an example. 

*2.* Again, you have to take responsibility for your own mind. I attended school/university in Canada, and I can't say that I was ever discouraged from being creative. Now, if you went to school in some Middle East/communist country, then I would agree that often times you would have been taught what, rather than how to think.

I am in full agreement with *fatcat,* that education gives the tools to be creative, but ultimately, you are the one that needs to take the next step, and education does not necessarily need to be formal either, hence no need to blame the education system. Anyone can educate himself/herself, especially nowadays.

Now the million $ question, who's the more creative, a couch potato or an active investor?


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## Belguy (May 24, 2010)

For every buyer, there has to be a seller. What, as the buyer, makes you think that you are smarter than the seller????:confused2::confused2:


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## Toronto.gal (Jan 8, 2010)

Belguy said:


> What, as the buyer, makes you think that you are smarter than the seller????


People buy and/or sell for different reasons, don't u get that? I guess not when you prefer to just...:sleeping::sleeping::sleeping: rather than be creative. :biggrin:


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## Belguy (May 24, 2010)

There are lots of things that I don't get but who cares????

:sleeping::sleeping::sleeping::sleeping:


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## dogcom (May 23, 2009)

The point where you might be smarter then the seller is when people are selling just to get out because they can't stand the selling and the losses from that any more. The reverse is also true when the buying is just for the sake of buying or you are buying because everyone else is then the seller will be smarter. When gold hit $1,900, silver hit $50.00 and oil almost hit $150.00 in the last 5 years those were easy sells. In fact when someone told my wife I should buy silver when it was passing $46.00 a few years ago I told them I was about to short it and I posted it here at that time.

Otherwise you are correct Belguy and that is there is probably good reasons why someone is buying or selling.


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## Toronto.gal (Jan 8, 2010)

Belguy said:


> :sleeping::sleeping:


:tears_of_joy::friendly_wink:


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## Argonaut (Dec 7, 2010)

I trust everyone got this year's hottest Christmas gift? Tickle-Me-Belguy. When you wind him up, he starts to say something about the "lowest fee broad based ETFs" before falling asleep. Can be stored under the bed for safe keeping. Not available in Europe.


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## fatcat (Nov 11, 2009)

Argonaut said:


> I trust everyone got this year's hottest Christmas gift? Tickle-Me-Belguy. When you wind him up, he starts to say something about the "lowest fee broad based ETFs" before falling asleep. Can be stored under the bed for safe keeping. Not available in Europe.


and is currently the world record holder for thinking-talking-bragging-reflecting-spending-time on a portfolio that is designed to be simple and require the least amount of thinking-reflecting-bragging etc etc etc etc etc :cower::tongue-new: ...belguy you need to open a trading account and have some fun ... no wait, oh god, we'd never hear the end of that :hopelessness:
--------------------

*eclectic*, it is easy to frame creativity as "what happens to inspired geniuses" regardless of their education and therefore to dismiss all that we are taught in university

but the fact remains that creativity requires hard work and well-educated people have the tools and knowledge to connect a lot more creative dots than less educated people

despite all the well known examples of creative geniuses like steve jobs and zuckerberg, they still are in the minority

university and corporate laboratories are still the places where most industrial and economic creativity comes from and these tend to be well educated people

but i get your point there is a lot of pedantry on the average university campuses, we all must suffer through it to a degree


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## scomac (Aug 22, 2009)

Kudos to Toronto.gal and Argonaut for the entertainment value of their above posts! Thanks for making me smile. :encouragement:


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## thenegotiator (May 23, 2012)

Toronto.gal said:


> *1.* I don't like to read junk & university side by side. :frown:
> 
> You can't fully teach creativity nor expect such a thing; part of it is natural & self-taught as well. Take any brilliant mind around [past or present], or famous high-school dropouts, and tell me whether their innovation was all due to schooling? As an example, do you think that Zuckerberg learned everything he knows at Harvard? He probably had taught himself most of it before he even entered university.
> 
> ...



If i ever met this fine lady before i got married many many years ago i would have married her:chuncky:
fortunately we both are married and have children right?
We both are also happily married.
I have a very gorgeous wife and my best friend.
i am sure her hubby is her best friend.
what a magnificent trader/holder investor:encouragement:
extremely savvy and inteligent


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## Toronto.gal (Jan 8, 2010)

thenegotiator said:


> 1. If i ever met this fine lady before i got married many many years ago, i would have married her:chuncky:
> 2. I have a very gorgeous wife and my best friend.


1. And what if I had not accepted your proposal? :biggrin:
2. She must be one patient lady. :chuncky:

Happy for you!


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## thenegotiator (May 23, 2012)

Toronto.gal said:


> 1. And what if I had not accepted your proposal? :biggrin:
> 2. She must be one patient lady. :chuncky:
> 
> Happy for you!


There is no way you would not accept my proposal:biggrin:

She is a very fine and patient Jewish wife u are right:encouragement:


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## Barwelle (Feb 23, 2011)

I nominate this for Post of the Month:



Argonaut said:


> I trust everyone got this year's hottest Christmas gift? Tickle-Me-Belguy. When you wind him up, he starts to say something about the "lowest fee broad based ETFs" before falling asleep. Can be stored under the bed for safe keeping. Not available in Europe.


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## kcowan (Jul 1, 2010)

*39% of Fund Managers Beat the S&P in 2012*


> In 2012, 39% of managers beat the S&P 500. Value and Core managers achieved 21% and 38% success rates, respectively. 54% of Growth managers outperformed the benchmark.
> 
> Over the last 10 yrs, the percentage of managers in the Merrill data that beats their benchmark is about ~48%.


Wait a minute! Has someone been lying to us?

Source


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## doctrine (Sep 30, 2011)

From link:



> Update: Over the last 10 yrs, the percentage of managers in the Merrill data that beats their benchmark is about ~48%.


These numbers seem right. On average, slightly less than half of fund managers will beat the index. It's the law of averages, since when you add all fund managers in a given market together, they together become statistically relevant. This is of course after fees. suggesting that there is 1-2% above the market that the individual investor could also capture if they matched fund performance before fees.


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## Belguy (May 24, 2010)

Barwelle said:


> I nominate this for Post of the Month:


:sour::sour::sour::sour:


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## andrewf (Mar 1, 2010)

I'd question the methodology. They are saying % of money managers, not a $-weighted avg return.


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## kcowan (Jul 1, 2010)

andrewf said:


> I'd question the methodology. They are saying % of money managers, not a $-weighted avg return.


Isn't percent of managers beating the index that indexers always quote as the reason to be indexers? ISTR that the oft-quoted number is 20% beating, not 48% over 10 years.


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## andrewf (Mar 1, 2010)

Bigot is a bit loaded, no?


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## Barwelle (Feb 23, 2011)

Belguy said:


> :sour::sour::sour::sour:


Sorry Belguy. FWIW, I meant that as lightheartedly as possible (And I am sure Argo did as well)


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## Belguy (May 24, 2010)

Barwelle said:


> Sorry Belguy. FWIW, I meant that as lightheartedly as possible (And I am sure Argo did as well)


No offence taken!!:encouragement:eaceful::smile-new::semi-twins:


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## alvanson (Dec 13, 2012)

Back to the original question.

What about leverage? If it costs 4% to borrow and you leverage 2:1, a 10% return turns into 16% (2x10-4). Of course, a 10% loss turns into a 24% loss (-2x10-4).

Definitely riskier, but higher potential reward.



wwwater said:


> I am in my early 30s and I have a high risk tolerance, I have the patience to stick with a plan, provided that it works.
> 
> I agree indexing is a cost efficient way to reduce the investment expenses and pocket most of the investment growth; however, I am having second thoughts after seeing the statistics posted on the Couch Potatoes website:
> 
> ...


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## Eclectic12 (Oct 20, 2010)

Belguy said:


> For every buyer, there has to be a seller. What, as the buyer, makes you think that you are smarter than the seller????:confused2::confused2:


Hmmm ... I'm assuming by "smarter" you mean the seller is making a mistake. That doesn't have to be the case. 

A seller could know it's not the best time to sell but selling may be the lessor of two evils as they need the cash for their own uses or maybe they have a pressing need from things like margin etc. or finally, they are protecting their capital as they are about to buy a house.

Or maybe the sellor is a MF that has had a string of redemptions and has to sell to pay off it's obligations. I'm sure the MF manager is going to see this as business as usual.


Or then again - the seller might not be making a mistake. The stock could have dropped 20% so that it looks like a "mistake" from the short term viewpoint. If they've owned the stock for a long time, their cost might mean the sale is for a less healthy but still rewarding profit.



Cheers


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## scomac (Aug 22, 2009)

Eclectic12 said:


> Hmmm ... I'm assuming by "smarter" you mean the seller is making a mistake. That doesn't have to be the case.


Agreed. Until you know the motivation of the seller -- and you never will -- you can't assume that the trade is a mistake, nor the corollary, that your trade is a mistake either. It's entirely possible for both to be appropriate courses of action.

It's not about being smarter than the opposition or better researched or necessarily better anything. It's about having an intellectual framework from which to make decisions that are free from emotion and having the discipline to stick to the plan. The retail investor is not encumbered by many of the conditions and restrictions that institutional investors operate under. The lack of having to deal with these sorts of things is a significant advantage.


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## kcowan (Jul 1, 2010)

scomac said:


> The retail investor is not encumbered by many of the conditions and restrictions that institutional investors operate under. The lack of having to deal with these sorts of things is a significant advantage.


That is a structural advantage that favours the individual investor. In what other market does an individual have such an advantage? Usually markets favour volume purchasers but in these markets, volume works against them.


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## Assetologist (Apr 19, 2009)

And with this I agree!
There are advantages to being a free wheeling small-potato independent investor.
You are only accountable to yourself and your immediate family.


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## humble_pie (Jun 7, 2009)

.

here we go - this story on 17 jan/13:


*Female Hedge Fund Managers Ruled the Markets in 2012*

*By Nicole Goodkind *| Daily Ticker

In the battle of the sexes, women are on top — at least when it comes to hedge funds. A new study released by consulting firm Rothstein Kass finds that female hedge fund managers outperformed men through 2012. Last year hedge funds run by women made an 8.95% return while the global hedge fund index only returned 2.69%.

The report found that women-run hedge funds had beat the global hedge fund index not only in 2012 but also for the five years leading up to 2012.

Meredith Jones, director at Rothstein Kass and the author of the report, believes there are two primary factors at play in the exceptional performance of women in alternative investments.

- Women tend to be more risk-averse than men. “Women may be better equipped to position a portfolio to handle market volatility which we certainly have had no shortage of over the past five years,” Jones tells The Daily Ticker's Lauren Lyster.

- The size of women-run hedge funds. “Women-run funds tend to be smaller pools of capital than men-run funds and as a result of that they’re more nimble and better able to navigate the market,” says Jones.

http://finance.yahoo.com/blogs/dail...nd-managers-ruled-markets-2012-135223093.html


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## andrewf (Mar 1, 2010)

Did they control for the hedge fund strategy? Ie, are women more likely to run certain types of hedge fund vs. others?


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