Comments by "JP 72" (@739jep) on "Chasing Top Fund Managers" video.

@johndorian3685 ‘I have no idea what “market efficiency” means’. Well that explains a lot having read your comments. It’s a topic every investor should be familiar with.
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No I don’t think he is.
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Nope. Past performance is not an indicator of future performance - in either direction. And although you’d expect actively managers portfolios to underperform after costs over a long time period that doesn’t mean they’ll return a loss.
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@johndorian3685 I’m not so sure that it’s difficult to ‘define’ at least basically. In a perfectly efficient market prices should reflect all knowable information and prices should trade at their fair value. However you are correct that it’s difficult to measure/prove outright as it faces the joint hypothesis problem. That does not mean it is irrelevant to the investor. It may be impossible to ‘prove’ but we can still empirically test predictions of the model , and after testing them the general consensus in academia is that markets are at least efficient enough that investors should behave ‘as if’ they are efficient. Note that this does not mean that markets are efficient , not even Eugene Fama claims they are perfectly efficient - but what really matters is how investors should act. You are of course free to outright reject the hypothesis , a collection of academics do. But they, for the most part, still recommend people invest as if they’re efficient. I think most of the disagreement stems from whether to classify certain variables as ‘risk’ or ‘anomalies’. If the anomalies are expected to continue I see no reason why the labels matter all that much anyways. Thjs evidence includes the random walk of stock prices , the speed at which prices react to news, and how difficult it has historically been to beat the market long term on a risk adjusted basis (you can of course beat it by being exposed to more risk). Buffet for example has beaten the market long term by investing with leverage and having extra exposure to the value risk premium. Without a decent understanding of the efficient market hypothesis, a lot of Ben’s positions may seem wrong to you especially as they are at odds with a lot of views you will find in trading courses , investment books and even advice from advisors. I would say that those sources positions are unsupported by the empirical evidence and are likely biased in their position. You may in fact reject it yourself (and it would likely be to your own detriment in my opinion) but at least you will understand where Ben is coming from and we can discuss the literature and the evidence to identify exactly why we’re in disagreement. Btw - loved you in Scrubs 😜
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Studies that looked at a cross section of fund manager performance were discussed later in the video.
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The details would differ based on the individual. But he’s been quite clear about the main points this entire time? He has even published a couple white papers with model portfolios included.
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@utubethumbsup care to reference any papers that back your claims up?
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@utubethumbsup if I had to enter a contest where we had to communicate to people that we had no idea what we were talking about (without explicitly informing them that was the case) I would just hand in your comments word for word.
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@johndorian3685 to that I would ask how did people know Buffett would do that ahead of time? It doesn’t take a genius to go through the history books and point to the top performing fund managers. And could you use the same factors you used to identify Buffett would do that to choose the next top performing fund manager now? The data would suggest that investors are very poor at doing so. Buffett also used leverage and had extra exposure to value stocks - the market index is not an appropriate benchmark in this case. If you had used leverage to invest in a value fund that gap would have been a lot smaller.
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People who invested with her probably can’t afford rent now
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@royjonzejr not sure that’s what the OP meant , I think he was referring to index investors specifically earning returns from a market index which is the sensible choice because active investors do the work which leads to accurately priced stocks? Your own analogy seems to lack a crucial variable - risk. The coal mine investor has invested his capital into the business and risks losing it all should the business fail - the worker faces no such risk and will receive a guaranteed salary for their efforts (irrespective of business performance unlike for the investor) and should the business fail they lose their job and not their capital. To be fair people have struggled with this concept for a long time and whether it is fair or not. Not sure there is a perfect answer hence why people are so divided on political issues related to this.
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Sounds like something you’d find in his video about ‘stock picking’ - but I’d have to rewatch to be sure.
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Why do we need to consider them when we have a cross section of data to look at?
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@AndrewLetendre I think I understand what you’re saying. I do think those people who are outperforming due to skill can take it though. To be fair , the video didn’t address the presence skill vs luck for all investors - but specifically luck vs skill for fund managers. The claim that outperformance is likely due to luck was supported by referring to two important studies (two I can recall off the top of my head anyways). So that claim was not unfounded. Nor do I believe that Ben was was claiming that none of them were skilled, it’s just that in the context of fund management , that spoils of that skill are more likely to be enjoyed by the fund managers themselves than by those who invest in the fund. That is also backed up by the data.
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