So what I learned from this is that I should become a professional money manager, because I'll be able to make a lot of money without knowing what I'm doing.
The fact that an S&P 500 mutual fund beats "most" actively managed mutual funds suggests to me that active management somehow creates a set of conditions that makes the performance of the actively managed fund worse. Here's an alternative possibility: the active managers don't buy because a stock is undervalued. They buy because the stock is "hot". But when a stock is "hot", perhaps that means that it has already climbed most of the hill to its peak value. By the time the active manager selects it, the stock has little value yet to be realized.
I know jack shit about economics and investing....but I decided to do a bit of research and buy some stocks on a virtual stock game..I invested 100k and in 4 months I made 14k! and that's not including dividends!..perhaps I did get lucky..idk...but I did take advantage of the stock price dip due to Brexit, and I did pick stocks in companies that do exports and trade worldwide due to the fall in value of the pound............perhaps its beginners luck but I also think its about not getting too greedy, playing it relatively safe, and its also about timing..........also I think dividend reinvestment options are good because if youre not a big earner, you can avoid fees...obviously big companies that stand the test of time like Coca Cola are the best bet.
If after 2 years, only 4% of the top 25% investment firms are still in the top 25%, wouldn't this suggest that they are doing worse than the monkey? If it was completely random, wouldn't it be 25% of them? And if so, there is predictability here, and you could bet on everyone who was not in the top 25% two years ago, and make a small but sure return. Obviously, this is nonsense, so, I am confused. Can you help?
Hmmm, I interpreted it as starting with 25% of all firms, and after 2 years the number that still made the cut was 4% of all firms. This is slightly worse than chance (6.45%), but I don't know if it's significantly so. I think your interpretation is closer to what was actually said, but mine is closer to what I'd expect to actually happen.
Not really.........You still have to pick stocks with a good probability of success. i.e. trading in penny stocks is a losing strategy. Day/short term trading s a losing strategy.
You are correct, but I guess when he coined the term "random walk" he did not mean a random walk in the world of penny stocks :p.... what he means is a naive diversification is as good as a well structured/modelled one :)
Actually, Warren Buffett disagrees with this thesis. He responded with this speech at Columbia University (where he studied under Benjamin Graham when he attended the university himself!). Granted, not many can be an expert like Buffett and the brilliant investors that espouse their strategies, but clearly, it destroys the monkey argument: www8.gsb.columbia.edu/sites/valueinvesting/files/files/Buffett1984.pdf
Talk about activist investors and how one can become one by investing in pink sheet stock companies (i.e since most of us are not billionaires like Buffet).
Completely wrong! While it's true that it's not reasonably possible to get rich quick in the stock market, it is extraordinarily easy to beat the market. The secret is to buy dividend stocks and/or share buy-back stocks during market corrections, while avoiding obvious losers that have major financial problems. You won't get rich quick with this strategy, and you will have losers from time to time, and you will occasionally not beat the market. But the gains over 30 years will be at least triple the gains produced by the market/index funds.
If you look at a poll of financial literacy in the test, tons of people just can't estimate the interest on their credit cards, let figure a Quick Ratio.
I don't understand the relevance of your reply to my post. My post was in response to the content of this video. In this video is claimed that active fund managers cannot beat the stock market. While it is true that many of them choose not to beat the market, it is entirely possible for them to beat the market. My simple system of buying dividend stocks, while avoiding obvious bad apples, easily beats the market over the course of 30 years. Active fund managers that use this system, like Warren Buffett, beat the market nearly every single year.
Nice dude, but too many people can't crunch the math to see when dividends are coming at the expense of debt or putting off capital upkeep. That's why not everyone chooses to do the research: they're incompetent. I'm sure that's only partial explanation as to why the whole investing public isn't emulating you. We'll probably see more in the Efficient Market hypothesis videos, where a discussion of the trend of the random walk's performance is welcome.
Oh, now I get it. You're going into the details of my super brilliant investment strategy. I disagree with you. I think that people do not have the information to figure out my strategy on their own. I think when they look for the information, they encounter a lot of people who have an interest in the uninformed making bad decisions. As the old saying goes, be weary of the advice from people who have something to sell you. The problem is a system that profits from misinformation. Wall Street thrives on the fact that people don't realize that they can make money investing without the help of the overpaid fraudsters on Wall Street. The deep pockets of Wall Street fund the corrupt government system that ensures that the masses are under-educated
:) Sounds good. Only problem is not 1 but 2 nobel price laureates have statistically proven beyond a shadow of a doubt that you're wrong. There is no such thing as stock picking skill. You examplifying one person as proof that you can in fact beat the market shows either that you didn't watch or understand this video or just don't understand statistics at all. All the while you've provided zero proof backing up your claims.
Check out our free personal finance unit plan, Career Readiness and Budgeting for the Age of AI: mru.io/sgj
What about my brilliant strategy of buying low and selling high?
Zachary Friedman you cant predict the market well enough
hahahaha mind blown! Thanks for sharing the idea!
Or buy high and sell higher?
That’s the 100 years question... Which Stock to buy ???
Tttt
So what I learned from this is that I should become a professional money manager, because I'll be able to make a lot of money without knowing what I'm doing.
You aren't wrong but you ain't right for it.
THERE IS NO SUCH THING AS A STOCK PICKER....HAVE A SYSTEM AND FOLLOW IT
The fact that an S&P 500 mutual fund beats "most" actively managed mutual funds suggests to me that active management somehow creates a set of conditions that makes the performance of the actively managed fund worse. Here's an alternative possibility: the active managers don't buy because a stock is undervalued. They buy because the stock is "hot". But when a stock is "hot", perhaps that means that it has already climbed most of the hill to its peak value. By the time the active manager selects it, the stock has little value yet to be realized.
"most" Keyword
I know jack shit about economics and investing....but I decided to do a bit of research and buy some stocks on a virtual stock game..I invested 100k and in 4 months I made 14k! and that's not including dividends!..perhaps I did get lucky..idk...but I did take advantage of the stock price dip due to Brexit, and I did pick stocks in companies that do exports and trade worldwide due to the fall in value of the pound............perhaps its beginners luck but I also think its about not getting too greedy, playing it relatively safe, and its also about timing..........also I think dividend reinvestment options are good because if youre not a big earner, you can avoid fees...obviously big companies that stand the test of time like Coca Cola are the best bet.
I literally missed 1 compound interest doubling listening to the Motley Fool - NEVER again
please do a video on high frequency trading. how economist are looking at HFT?
I’d pick the monkey over Cranmer any day. Lol
Loved your teaching style!
They are about as good as throwing darts at a dart board, but not quite as good.
If after 2 years, only 4% of the top 25% investment firms are still in the top 25%, wouldn't this suggest that they are doing worse than the monkey? If it was completely random, wouldn't it be 25% of them? And if so, there is predictability here, and you could bet on everyone who was not in the top 25% two years ago, and make a small but sure return.
Obviously, this is nonsense, so, I am confused. Can you help?
Hmmm, I interpreted it as starting with 25% of all firms, and after 2 years the number that still made the cut was 4% of all firms. This is slightly worse than chance (6.45%), but I don't know if it's significantly so.
I think your interpretation is closer to what was actually said, but mine is closer to what I'd expect to actually happen.
legendas não funcionam 🤦♂
Not really.........You still have to pick stocks with a good probability of success. i.e. trading in penny stocks is a losing strategy. Day/short term trading s a losing strategy.
You are correct, but I guess when he coined the term "random walk" he did not mean a random walk in the world of penny stocks :p....
what he means is a naive diversification is as good as a well structured/modelled one :)
Such great quality free education is rare.
Thanks a lot.
Awesome channel
by this logic, every Nobel winning economists is also just the lucky ones who happen to write the right paper.
That is good advice
Excellent Video...!
Actually, Warren Buffett disagrees with this thesis. He responded with this speech at Columbia University (where he studied under Benjamin Graham when he attended the university himself!). Granted, not many can be an expert like Buffett and the brilliant investors that espouse their strategies, but clearly, it destroys the monkey argument: www8.gsb.columbia.edu/sites/valueinvesting/files/files/Buffett1984.pdf
Talk about activist investors and how one can become one by investing in pink sheet stock companies (i.e since most of us are not billionaires like Buffet).
brilliant
Thank you MRU!
I understand nothing 😑
@William Russell not a good advice, it has no asset value
Buy index funds. That's all
Another great video.
What is the point of this video?
I was on the same elevator as the Mad Money guy
Completely wrong!
While it's true that it's not reasonably possible to get rich quick in the stock market, it is extraordinarily easy to beat the market.
The secret is to buy dividend stocks and/or share buy-back stocks during market corrections, while avoiding obvious losers that have major financial problems.
You won't get rich quick with this strategy, and you will have losers from time to time, and you will occasionally not beat the market. But the gains over 30 years will be at least triple the gains produced by the market/index funds.
If you look at a poll of financial literacy in the test, tons of people just can't estimate the interest on their credit cards, let figure a Quick Ratio.
I don't understand the relevance of your reply to my post.
My post was in response to the content of this video.
In this video is claimed that active fund managers cannot beat the stock market. While it is true that many of them choose not to beat the market, it is entirely possible for them to beat the market. My simple system of buying dividend stocks, while avoiding obvious bad apples, easily beats the market over the course of 30 years. Active fund managers that use this system, like Warren Buffett, beat the market nearly every single year.
Nice dude, but too many people can't crunch the math to see when dividends are coming at the expense of debt or putting off capital upkeep. That's why not everyone chooses to do the research: they're incompetent.
I'm sure that's only partial explanation as to why the whole investing public isn't emulating you. We'll probably see more in the Efficient Market hypothesis videos, where a discussion of the trend of the random walk's performance is welcome.
Oh, now I get it. You're going into the details of my super brilliant investment strategy.
I disagree with you. I think that people do not have the information to figure out my strategy on their own. I think when they look for the information, they encounter a lot of people who have an interest in the uninformed making bad decisions. As the old saying goes, be weary of the advice from people who have something to sell you.
The problem is a system that profits from misinformation. Wall Street thrives on the fact that people don't realize that they can make money investing without the help of the overpaid fraudsters on Wall Street. The deep pockets of Wall Street fund the corrupt government system that ensures that the masses are under-educated
:) Sounds good. Only problem is not 1 but 2 nobel price laureates have statistically proven beyond a shadow of a doubt that you're wrong. There is no such thing as stock picking skill. You examplifying one person as proof that you can in fact beat the market shows either that you didn't watch or understand this video or just don't understand statistics at all. All the while you've provided zero proof backing up your claims.