From: Robert J. Bradbury (bradbury@aeiveos.com)
Date: Sun Jun 15 2003 - 14:14:20 MDT
On Sun, 15 Jun 2003, Spike wrote:
> Dossy wrote:
>
> > I'm not interested in proving anything. The strategy of "buy a
> > sweetheart, hold it until it goes up 10% and sell it" seems to work
> > pretty well.
>
> The problem is recognizing a sweetheart. If one in
> ten of these sweethearts go all Enron on you, then
> the 10% profit you made on the others average out
> to nada.
That's why I said "stop loss orders". 10-15 years ago it
was reasonably difficult for the average investor to get
daily range data for stocks -- now it is not. So all
historic studies on investor success probably need to
be redone because it was very difficult to do reasonable
technical analysis -- given the data availability and the
speed of computers now its a piece of cake. The same
is probably true (about the historic studies not being
worth the paper they are printed on) can probably also
be made because of the development of derivatives
('70's or '80s if I recall). There are probably other
examples of changes -- the decline in broker's fees,
the development of off-market trading (so you can
respond to news announcements after the markets are
closed if you are clever enough to watch for them).
[snip]
> That fund was hammered worse than all the others, as nearly
> all of those companies crashed.
Then one had a pretty stupid fund manager (or was they
were getting bad advice from the analysts -- we know
how much the analysts cooked things over the last
few years because the investment banking side of
the brokerage firms wanted the fees).
How many investors (or brokers for that matter) actually
take the time to *read* the annual reports, watch the
insider trades or read all the required SEC filings, etc?
Investing properly is really hard work.
> There is a filter in place: people talk a lot more
> about their winners than their losers, causing others
> to think they are net winners.
> This explained something that puzzled me: why my fund
> managers were achieving only market average over the
> long haul, or actually not even market average.
Rafal may have explained part of the explanation.
Most fund managers have to diversify their holdings
(to try and protect themselves from Enron/Worldcom
like situations). If you have to diversify that much
its hard to have enough time to accumulate the information
to pick winners and avoid losers. By the time you take
out a couple of % in fund administration fees you are
already under the average market return.
Robert
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