How many people get above average returns over the long term?

[alex123711]

Many people argue that you are better off in the long term putting your money into index funds, I think the average is around 7-8% compounded and that most money managers do not beat this, there are some of course that do beat this such as famous value investors; buffet, greenblatt etc. But how many individual investors actually beat this return also?

 

[tech/a]

Many people argue that you are better off in the long term putting your money into index funds, I think the average is around 7-8% compounded and that most money managers do not beat this, there are some of course that do beat this such as famous value investors; buffet, greenblatt etc. But how many individual investors actually beat this return also?

Speaking for myself.
A very high % of traders / Investors fail to the point of losing their initial stake.

On funds I use for Investing (Super) and Trading ( Capitalizing on surplus funds which I can trade over 50 trades a year).
I do better than 8%

If you don't have the ability or the time then an Index Fund maybe an option.

 

[Zaxon]

Many people argue that you are better off in the long term putting your money into index funds. But how many individual investors actually beat this return also?

The All Ordinaries has returned 10.97% over its lifetime (including dividends). That's the "Gold Standard". If you don't have a reasonable expectancy of beating that over the long term, then you're better off using an index fund.

The shorter your holding period, the greater the skill you'll need. The account wipeout percentage of day traders is very high. So is the reward, if you can master the skill.

Investing needs to account for the personality of the investor too. Some people hate losing, so protecting their capital becomes a higher priority for them, even if it reduces their potential returns. Some people crave activity, and so would get bored with buy-and-hold. Others like to set and forget.

 

[explod]

The big ones hit it right in the beginning and are then able to have scouts on the ground, auditors etc. Of course as holdings grow they can have a say and are also in touch.

If one could really hit a 10 your next move would be to take ownership of tattslotto.

Small local explorer/producers in mining are good as you can visit the areas, talk to workers, attend meetings, profile career credentials of management etc. My first like that was in 1968 from 10 cents to 90 cents in about four months. However that is regarded as insider trading as I used to meet those involved at the Pub on Friday nights.

 

[willy1111]

Many people argue that you are better off in the long term putting your money into index funds, I think the average is around 7-8% compounded and that most money managers do not beat this, there are some of course that do beat this such as famous value investors; buffet, greenblatt etc. But how many individual investors actually beat this return also?

What's important is whether YOU can.

I believe a diy investor has more chance of doing it than an active fund.

Below are some threads which may be worthy of supporting that view

https://www.aussiestockforums.com/threads/smsf-returns.25070/

https://www.aussiestockforums.com/threads/asx-momentum-trade-book-part-2.29971/page-122

https://www.aussiestockforums.com/t...-milestone-feed-my-ego-thought-sharing.30692/

https://www.aussiestockforums.com/t...hanical-system-a-trend-following-diary.30641/

https://www.aussiestockforums.com/t...thly-momentum-portfolio-vs-index.34268/page-5

I think it is mathetical. An index is the average return of a group of stocks. VAS for example is the ASX 300, weed out some of the ordinary shares and one should have a fair chance of outperformance.

Then again maybe it is just luck.

Upto you to decide.

 

[Lomu]

I've been running my SMSF for about 3 and a half years; in that time, I've been running at about 38% per year.

I really don't think I have any more skill than any other investor- perhaps less; but I got lucky with some companies that have really gone well. But at this stage I'm getting itchy fingers and starting to lean into the thoughts of selling, paying the CGT and dropping the profits into an index fund.

But yes; beating the market over the long term seems to be nearly impossible for the average investor. Better to just park your money in VAS or VTS and sit back and let compounding do the work for you.

 

[kahuna1]

MFG .... or better MFF ... the latter is in the top 10 fund-mangers over 10 years in the world. He founded MFG and ran its portfolio for its first 6 years.

Even morningstar, who is meant to follow performance cant get their return right on MFF. The other 5 serious people and investment houses who follow returns however can and I think last one was 7% PLUS above the index over 10 years and similar for 5 and 3 year measures.

Its rare, to find a fund manger that adds value, year in, year out. The guy now running MFg is a good fund manager beating the index after costs by a small margin, so he is in the top 10% of fund mangers globally.

Beating it by 5% or more, the latter, MFF ... is, risk adverse, and has rarely taken any steps back at any stage even in the GFC compared to the index. Hard to do, in fact very hard to do.

Putting money onto an index fund, an overseas one based on USA stocks, is, well, given the index and USA stocks are at all time highs, all time highs compared even to the peaks of 1929 and 2000 ... and in fact 120% of those highs trading at 150% of GDP due to the fact no tax is being paid by any of them in the USA and rest of world. Investing into all times highs when looked at this way for the USA index, is asking for below par returns at some stage likely in a serious way.

So I caution the long term returns on both MFG and MFF until some sanity returns to the USA and its tax system and healthcare one.

Our index, well ... we are not even to pre GFC levels. Much the same for most other nations as they actually pay for healthcare ... USA has abandoned it ... and run a more balanced society than the USA. USA has decided, or the top 1,000 CEO;s and Billionaires there don't like tax, and here we have a stock market propelled by ... something that has a very finite life.

Our market, the tax burden has actually gone up 1% post 2000 .... USA has CUT the tax it collects, despite record profits and collects 6% less of GDP in tax.

Buying an index fund here, well, will not make you rich. MFF and MFG invest manly overseas for a reason and buying a stock here with a millstone around its neck, ignoring the human cost .... is why the USA is nearly 3 times the low ... of 2009. If we were the same the index would be 9,000 on the ASX 200 not 6,200 ish.


As for domestic decent fund managers ? who invest mainly in Australian shares ? Well ... last time I looked it was hit and miss and NONE .... not a single one got a tick beating the index by any decent margin without... WITHOUT leverage ... ona 1,3,5, and 10 year scale. Sure some pulled the proverbial rabbit out of the hat one year, only to swallow rubbish the next year.

Maybe its changed since I last looked but wrote a paper on it in 2016/17 so its unlikely anything new has occurred. Favorite trick or game woeful very big fund mangers played was when their fund did so badly it performed 2,3,4,5% Under the market and some cases close to 10% over a period, they wound the fund up .... covering their stinky record and opened a new suckers fund.

If one can outperform the market by 5% or even 10% over a long period, and the market itself over time rises 5% ... it doesn't take long to increase your wealth.

 

[Zaxon]

I've been running my SMSF for about 3 and a half years; in that time, I've been running at about 38% per year.

Excellent return! I'm sitting on 37.5% return since July 2018. The year isn't over yet, so it could go either way. That rough spot in Nov/Dec 2018 was a wild ride.

 

[aus_trader]

Excellent return! I'm sitting on 37.5% return since July 2018. The year isn't over yet, so it could go either way. That rough spot in Nov/Dec 2018 was a wild ride.

Do you buy and hold mostly or actively trade?

 

[Zaxon]

Do you buy and hold mostly or actively trade?

I hold stocks typically from a few months to a few years. That makes me an investor not a trader, but not really a buy-and-holder either.

 

[aus_trader]

I hold stocks typically from a few months to a few years. That makes me an investor not a trader, but not really a buy-and-holder either.

Done well Zax, so far the strategy looks to be having a very good return over a year.

 

[Zaxon]

Done well Zax, so far the strategy looks to be having a very good return over a year.

Thanks. It will be interesting to see how the same strategy performs in a down market. I guess I'll find out soon enough

 

[aus_trader]

Thanks. It will be interesting to see how the same strategy performs in a down market. I guess I'll find out soon enough

Yeah, we can't predict when but suddenly the bear can come out of the blue...

 

[Value Collector]

Many people argue that you are better off in the long term putting your money into index funds, I think the average is around 7-8% compounded and that most money managers do not beat this, there are some of course that do beat this such as famous value investors; buffet, greenblatt etc. But how many individual investors actually beat this return also?

I have averaged a return of over 20% pa over the past 19 years.

Some of this is due to the use of leverage.

But yes, on average as group we can't all beat the market, So if you are giving advice to the masses, and you want to inoculate them from the risk of under performance, then it makes sense to suggest that they stick to index investing.

However, if a person is going to spend the time and dedicate themselves to learning, and they have the required emotional stability, then they may do better by avoiding the index.

But like anything there will be winners and losers amongst those that try to out perform, I think 99% of people would be better of just going the index route.

 

[Zaxon]

I have averaged a return of over 20% pa over the past 19 years.

Some of this is due to the use of leverage.

That's very impressive. Can you estimate what you return would have been without using leverage?

 

[kahuna1]

Hi,

an observation and Zaxon question is a good one .... leverage ... having a portfolio of say 300k but only putting up 50 k and leveraging at 6 times works, then it does not and its all gone.

CFD's whilst I understand popular, during times of crisis, and whilst I never touch them, ever, the prices are not ASX ones but the person with WHOM you have the opposing position with. A BIG BIG issue.

As a person inside markets for 30 plus years, the number of people who MAKE a full time living via trading verses those who try are less than 1% longer term. The market sorts out all things over time.

Lastly, whilst a fan of technical side trading to SOME extent, without knowing what your buying and IF it has any real value, your mission is eventually going to run into things which will and do occur such as a company out of the blue going bust. Loss 100% ... or as we saw with Crown say this week ... your short because technically its looking sick, the next day its up 40% .. then the takeover is gone and its down 20%.

At some stage, stocks which eventually will be worth nothing, look great technically and the way from one side to the other is usually littered with massive GAPS and often one day its $1- and the next ZERO.
Yes diversification helps ... and even the best Fundamental analysis cannot help sometimes when the company lies to you, but it reduces buying things which likely have little potential longer term.

PDN the Uranium stock, went from under 10 cents to $10- back to 15 cents or so. Great ride some of the way UP and DOWN ... but the down is and was hit by gaps and where the price did not emerge for some time. Using CFD's ... they often have the price removed ... or trading 2% below the ASX in these situations.

Nothings perfect I suppose, just human nature sometimes takes a system and a stock you have made a lot on and are only meant to be holding a 15k position in, and cutting a loss at 1k and your holding a position at 60k and not taking a loss at 5k and eventually taking a bath of 30k loss.

Last observation and its a very key one. The best performing stocks, GOOD ONES ... big ones ... on this site and via brokers ... often you will find LITTLE if any chat, few followers and a stock say that goes up 20 fold or 40 fold such as CSL is rarely mentioned and often is a sell on brokers recommendations despite going up 40 fold. Others say like MFG, a 40 fold gain in 10 years, if not double that with the options and then second options, was not covered or even spoken about by brokers for a very long time.

Great idea and holding religiously .... CUTTING religiously ... no matter what and RUNNING profits ... religiously is what will make or break the system.

In a bull market, such as the USA and we have had to a lessor extent post GFC all works one way, in times of say economic turmoil or weak economies, the corrections and gaps are brutal often without exits to stop loss.

Good luck

 

[Value Collector]

That's very impressive. Can you estimate what you return would have been without using leverage?

Sorry Mate, I don’t have the information I would need to make an accurate estimate on that, it would just be a guess.

I did the calculation last year based on the following.

1, I know exactly how much I had when I left home 19 years ago.

2, I know exactly how much I saved each year from my wage.

3, I knew what my portfolio was worth when I did the calculation.

These from these three figures I can work out my investment gain over that time was about 22% per year.

It would actually be a bit more, because I have been living off my portfolio for a while, and I didn’t factor in the withdrawals I have made, just its present value.

————

How ever, as I said over that time I used leverage eg. Investment property loans, a margin loan and options.

But yeah, 22% was across the entire investment portfolio which includes some residential property, so the shares side of things must have been well over 22%.

 

[rnr]

Hi kahuna1,

"CFD's whilst I understand popular, during times of crisis, and whilst I never touch them, ever, the prices are not ASX ones but the person with WHOM you have the opposing position with. A BIG BIG issue."

Not all CFD providers in Australia offering ASX CFDs operate their business in the same way. For example FP Markets is a DMA (Direct Market Access) provider for ASX securities and when you place a BUY or SELL order with them, your order is visible in the market until filled. You can look back through the ASX history for that day and track the transaction. Leverage is certainly involved and you need to factor that into your position size calculation.

Cheers,
Rob

 

[kahuna1]

500:1 Leverage

FP brokers with how much capital behind them ?
https://www.fpmarkets.com/

Nothing like giving hand grenades to children to play with. 500:1 Leverage ,,, gee a 0.2% move and your GONE !!

this address rings a bell ... isn't it Tri-continentals old location ?

First Prudential Markets Pty Ltd. ... First Prudential Markets Ltd is licensed and regulated by CySEC (Cyprus Securities and Exchange Commission) with licence number 371/18.

Hilarious.

Good luck.

 

[Value Collector]

.... leverage ... having a portfolio of say 300k but only putting up 50 k and leveraging at 6 times works, then it does not and its all gone.

Yep, like fire it’s capable of cooking your lunch or burning your house down.

You have to know what you are doing.

Leverage applied in sensible ways and sensible amounts to a sound investment operation can improve returns.

However leverage applied in silly ways, in silly amounts to a speculative portfolio will eventually blow up in your face, even if it works well for a while.

I wouldn’t suggest a beginner use leverage.