The collective average are Losers -- it was kind of obvious that Warren Buffet's fund would win that ten year bet, Buffet: 85% Average hedge fund: 22% For a ten year period...that's kind of horrible performance, atleast from the retail trader's perspective.
Hello, I remember this bet. LOL, and all he did was buy 1 time and hold. The hedge fund probably made over 5000 trades already and still lagging the index.
More proof the trader usually messes things up. Like the sign for the manager in a dugout before he makes a change, "You will rarely win a game but often lose one."
Investors don't understand the real cost of execution and the major drag when having to pay someone else to do the trading for you. This even ignores the tax implications of short-term gains tax versus long-term positions which have capital gains but have not been sold thus no tax paid yet. This allows the compounding of returns to grow exponentially without a tax advisor. The hard question is if we can all see the obvious answer, why do people(we) still want to day trade and be a victim of the obvious outcome? Are people so short sighted that a winning day becomes expolated out and the assumption becomes that they are the exception? Is this just a convenient casino venue which is an extension of our desk and provides a bit of excitement to burn the edges of the nest egg? Are we just programmed to inflict self harm? Warren suggest that rich people look for a venue which is not accessible to the average investor because they feel they deserve something different and hopefully better. Why doesn't everyone just give their money to Warren given his incredible track record? The AGM has over 40,000 people attending each year, so the world's largest AGM does suggest that there is a smart group of people who just hand the money over to him. But what about the rest of the world?
Not really: "The bet was on the time period Jan 1 2008 to Dec 31 2017. The financial crisis didn't start until late 2008, 8 months after the bet was already in effect. The unexpected financial crisis starting so soon into the bet was a huge boost for the hedge fund side, because the S&P 500 (Buffet's bet) almost immediately lost half it's value. That makes Buffet's large victory margin even more impressive considering that he was losing badly after the first year due to the very unfortunate timing of the bet."
I posted something similar in a different thread... On average, Hedgefunds have the tendency to not make a lot of money, because they either trade against long-term-buy-hold AND against themselves. The against themselves part means that that bit is a zero-sum game.... One HF buys, the other sells short... both together don't make anything... they actually lose on fees etc. So in a bull market, WB will always outperform the total/average HF. And since I don't think there has been a 10 year bear market... or a bear market without a decent bull market as follow-up in a 10 year period, that's just a dumb bet to take for the HF or whoever was at the other side of the Buffet-bet.
Wouldn't Buffet be broke had the government not changed mark to market rules that saved him in 2008 or early 2009?
No, those trades you're referring to were apparently specially designed and the counterparty would've been just as screwed as Buffet if that went bust. Those market to market rules didn't apply to a one-off trade... when there is no active market in it...
I read somewhere that the 22percent would have been higher except 1/2 the gross gains went to management fees. I think that's a big part of his point.