I guess indont understand the paranoia. Some people get rich because of corruption and making phone calls like corrupt elected officials. But for the vast majority of people who obey the rules it’s very difficult for anyone in finance to beat the market when fees are considered which is nearly the whole premise of Mr Bogle."The financial system" which hires all these smart people is much bigger than publicly-available stocks, bonds, funds, a/k/a "the market."I would say that over the long term very few funds or investment vehicles out perform a simple broad-based index fund once fees are taken into account. So I disagree with your assessment that anyone in finance is smarter than any of us. Surely summer smarter and surely some or not but I don’t think it is a generalization that you can make. They, with dozens of math, PhD’s working for them and super computers. Analyzing billions of trades cannot perform the market net fees. Why would anyone else? I think those people are getting rich from the market very rarely, because they have good insight and more because suckers are investing with them. There is I think valid objection to this point. There are investors who are not looking to help out perform the market, but are looking for something like market returns with other goals. Major pensions, like Calpers reliably often and without having that recently nearly always underperform the market. But their goal I think is not necessarily outperforming as much as making sure that , they can make the payments that they need to to their members and secondarily maximizing returns. Otherwise it would be a lot less expensive and their performance would be a lot better if they simply dumped it all into the standard and poor 500. Hopefully that is their rationale for spending so much money to have people manage their funds because their returns are generally mediocre at best and often terrible.You've got a beef with IQ and want to argue for the value of character. That's fine. But I think you have changed the grounds of the discussion we are having. I said "the financial system is wholly controlled by the smartest of the smart" and you countered "IQ alone probably can't determine smartness leading to investment success." I didn't say IQ led to investment success. I said it led to financial system control.With indexing, Jack Bogle was thinking mainly of small, non-pro investors at the mercy of Wall Street pros. My point all along here is that IQ alone probably can't determine smartness leading to investment success, as Bogle, Buffett, Munger, etc., have often noted in stating the need for emotional control. Here are a couple of books that can help explain that need for both:
Mr. Bogle is famous for figuring out a way someone who is not smart can still get a fair share of results from investing, by buying the index and holding. So we do not control. We buy the whole thing, because we know we are not that smart and are not in control. Yes?[/b]
_The Emotionally Intelligent Investor: How Self-awareness, Intuition and Empathy Drive Performance , by Raven Mehta
_Emotional Intelligence: Why It Can Matter More Than IQ, by Daniel Coleman
If someone is above the average intelligence and good at finance, they get hired. By the financial system.
And we on this forum are small, non-pro investors at the mercy of Wall Street pros, except that we index, and thus escape their notice. Mr. Bogle saw that we cannot get our fair share of investment return by competing with the bigger fish directly. And Mr. Buffett and Mr. Munger (RIP) are so large they create their own gravity and are called when the financial system itself is in trouble. I can learn many things from them generally but should not invest like them. I don't know the people they know, and they don't share info until after they've made their money.
The financial system includes banking, lobbying of agencies and governments, payment systems and their parasitic cash-back or rewards arrangements, buy-now-pay-later systems, payday lending, predatory auto loans, collections, loans to businesses and ventures which are not bonds, mergers and acquisitions, and the legal apparatus down to who writes the itty-bitty tiny-print cardholder agreements for credit cards. Trade agreements worked out with other countries; mandates that certain endeavors shall be favored and others shall be disfavored. Yes, it needs smart people, it's a theoretical system with lots of changeable rules and moving parts.
There are lots of ways to make bank (literally) in this theoretical system and "beating the market" is not necessary for most. At a certain level, people just pick up the phone and call each other. Someone not at that level would do well to invest by buying the index to get a fair share of the results.
Statistics: Posted by KBR — Mon Dec 25, 2023 1:03 am — Replies 76 — Views 11878