Are you an active or passive investor?

[caesar]

Do you guys go with an index strategy or do you think you (or whomever you pay) can outperform the market?

All of my investments are in Vanguard funds.

I am especially interested in hearing if the "audio objectivists" and "science-minded" guys think they can beat the market.

 

[Andre Marc]

Do you guys go with an index strategy or do you think you (or whomever you pay) can outperform the market?

All of my investments are in Vanguard funds.

I am especially interested in hearing if the "audio objectivists" and "science-minded" guys think they can beat the market.

I'm a big fan of Vanguard and most of my investments are there.

Index funds are the way to go. The financial services industry has long scammed the public with the non existent benefits of active management.

John Bogle, in one of his books said there is no industry that is so over compensated while providing so little value.

 

[Whatmore]

Do you guys go with an index strategy or do you think you (or whomever you pay) can outperform the market?

All of my investments are in Vanguard funds.

I am especially interested in hearing if the "audio objectivists" and "science-minded" guys think they can beat the market.

There's a big difference between thinking you can beat the market and paying good money after bad in the hope that someone can beat it for you.
Having worked in financial markets for 20-odd years I am sceptical as to whether anyone ever has an real edge (I know it's probably heresy to say this, but even Buffett might be a statistical anomaly).

 

[Speedskater]

Stephen Colbert talks to/at Christopher Steiner about almost instantaneous computer based trading.

"High-Frequency Trading - Christopher Steiner"

http://www.colbertnation.com/the-co.../high-frequency-trading---christopher-steiner

 

[jazdoc]

I know it's probably heresy to say this, but even Buffett might be a statistical anomaly

Might be worth reading Buffett's classic lecture "The Superinvestors of Graham and Doddsville":

http://www.tilsonfunds.com/superinvestors.html

To pick up on Caesar's original question, I think there is an analogy to be made between investing styles and audio. Successful active investing as an outside passive investor requires time and a certain emotional make up to be successful. Investors who don't possess these qualities seem forever doomed to buying and selling, usually at the wrong times. Peter Lynch once remarked that the vast majority of investors who owned Magellan Fund during his tenure made very little money because they bought high and sold low. These investors devour mass market financial magazines and every year buy the investments touted in year end investment editions, never noting that the long term investments touted are rarely repeated. They don't read annual reports. Indeed, most of them can't read a balance sheet. They barely passed high school chemistry, but they are absolutely convinced that the drug company stock with a stage I blockbuster drug will make them rich. The typical investor is almost certainly better sticking with low cost index funds. You won't be able to brag to friends at parties about 'beating the market' but the long term returns should ultimately be satisfying.

Likewise, many audiophiles aren't willing to put in the time to develop their own tastes, nor the patience to find the combination of gear that will satisfy for the long term. They avidly read equipment reviews, buying and selling equipment, and post about their latest and greatest purchases on audio blogs. Yet, despite the investment, they never find the sound that makes them happy. (I distinguish this audiophile from those who are always on the cutting edge and who have the willingness and resources to experiment.) Oft times, they rarely venture outside of their man caves to listen to actual live music. It is my observation that the 'usual suspects' of high end audio gear define a circle of performance, good but usually not great. You can move around within the circle with a new equipment purchase from the 'usual suspects' but in order to move out of the circle of performance they define, you must be wiling to buy outside of the circle of manufacturers. By analogy to buying low cost index funds, the returns will be satisfying but not spectacular. Buying outside of the circle won't necessarily get you better sound, but if you are truly chasing spectacular sound (i.e. beating the market), you've got to be willing to put in the time and effort (or have a great mentor).

End of diatribe

 

[Mosin]

I know it's probably heresy to say this, but even Buffett might be a statistical anomaly.

Anyone who owes the government one billion in back taxes might be a statistical anomaly!

 

[andromedaaudio]

Very active , i trade indexoptions on the dutch index , quite difficult and quite thrilling , were still in a bearmarket as i see it

Short at the moment , i do expect a little upside early next week

 

[caesar]

So for those of you who are active investors, how do you know if the market will go up and down, or your company will do well or not? Serious question! Personally, I'm not sure Google will be around in 7-10 years, as mobile search has a much smaller screen size and thus less opportunity for their ad business, but of course Google can evolve... And will Apple come up with the next blockbuster, or has their luck run out?

I guess I only see long term trends such as India, China, and other emerging market countries coming of age. We know that there will be short term bumps, but 20 years from now these countries will have a completely different standard of living. So I have invested good money, and will invest a lot more, in emerging markets. But that is a 15-25 year horizon.