MOETF return is likely lower than Buffett, which is likely no better than sp500
Do I envy those with higher annual returns? Typically we are seeing BTC or growth stock investors.
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See also
- ##hot^beloved asset classes 喜新厌旧
- MOETF: lower return than SP500 likely which points to beatIndex^absReturn: choose your goals
- j4 MOETF #w1r4
Background: I often feel my MOETF “system” is under fire when lots of fellow investors seem to make higher returns either quickly or over a short few years. Are their returns sustainable?
It’s crazy to use (realized or unrealized) return alone to compare 2 portfolios, ignoring quality of return, fundamentals, crashes, and variouis risks (liquidity risk, credit risk, investor sentiment risk). Buffett’s portfolio probably shows better risk-adjusted return than sp500.
I would say if the investor pockets the realized profit and stand aside with detachment, then she is wiser than most. But such wise investors are rare.
Some investors make “enough” (like USD 2M) and then scale back risk capital level to $100k .. “cash out n quit”. But such ungreedy investors are rare if under age 60.
- Buffett: “Only when the tide goes out do you discover who’s been swimming naked.”
- Buffett: “Speculation is most dangerous when it looks easiest.” — Easiest meaning easy-money on a bull market, without due diligence. Easiest meaning easy access, low requirement.
- An intern can achieve higher annual return than established value-investors but can you trust your money to him?
— jolt: sustainable if buy-n-forget→ sleep]peace, focus@work. With high growth investments (including BTC), can you sleep in peace?
— jolt: Intern… Learning is an absolutely essential process (takes years) before people can have reason to believe your high return is sustainable.
There are various types of knowledge/experience to learn. Here I tend to think of EE/AA.
If higher return were sustainable without substantial learning and risk analysis, then this would be similar to an arbitrage or a Ponzi scheme.
— jolt: arbitrage or Ponzi/pump-n-dump
Q: deep down, do you really believe your SP500 ETF would show compound return at least 8% a year for the next 40Y, with at most one negative year in any 5Y window? I think many respected publication assume just that.
If you believe it, then to you this represents an arbitrage or Ponzi scheme. You should really borrow money to the max and invest in SP500 ETF.
— jolt: diversification .. A related perception is “To beat the broad SP500 index, you will need higher concentration on growth stocks.” — this perception is very dangerous. Look at Shopee. High-risk-high-return.
Diversify to international stocks .. is a recommendation for U.S. stock investors. However, if you allocate 30% this way, usually it would reduce your portfolio average return.
— eg: hot growth stock investors … even index investors can hit higher return than my div-centric MOETF system.
— eg: personal xp: 1997 commodity trading .. return too high. My agent said 18% a month. Clearly unsustainable.
leveraged trading !
— eg: dot-com boom-n-bust .. https://www.fool.com/investing/best-warren-buffett-quotes.aspx says “I can’t think of another period of time when it was easier to make money in the stock market. ”
— eg: bccy.. I think the believers of growth stocks would also consider cryptocurrencies (Zhang Jun?), even though they recognize the fundamental differences between bitcoin and growth stocks in terms of economic value.
— eg: leverage .. some investors even borrow money to trade stocks. With $100k capital, they get to trade $200k and hit higher returns on capital
— eg: xp of many non-US investors .. newbies tend to lose money in stock-picking outside the U.S. I guess this is worse with growth stocks. In contrast, index investing looks like safer.