Value Investing How many ordinary people beat the market?

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How many ordinary people beat the market? Posted: 01 Jan 2020 08:31 PM PST Using value investing? We know about the famous ones such as Buffet, Burry, Schloss etc etc but how viable is it that a normal value investor can beat the market and how common is it? Most fund managers don't seem to be able to beat the index (after fees), is it worth trying as an individual? submitted by /u/alex123711 [link] [comments]

From gambling to investing Posted: 01 Jan 2020 09:39 PM PST The post title might bring to mind quotes by Buffett where he makes a dichotomy between gambling and investing on the basis of a proper valuation. He's right of course and the lesson is a good one, but I always chuckle to myself when I hear that contrast from him or others. Having spent over a decade gambling professionally and successfully, I draw the line differently: Any time you make a decision about what to do with capital, you're gambling. The question is whether you are gambling with an edge. I'm guessing many of you are familiar with advantage play, but for those who are skeptical, here's a really mundane example: Many casinos offer video poker that, when played with correct strategy, carries only a 0.5% house edge. If you join their player's club, you'll earn points as you play, and those points can be cashed out. Those points might be worth 0.25%. So on net the house still has the best of it by 0.25%, but if you only come to the casino on the days when they're offering a 6x points multiplier promotion, then you have a well-defined 1% edge on each bet you place. So now I'm considering gradually transitioning from casinos to markets and I'm trying to get a handle on the prospects for investing or trading from home (with no intention of ever going to work in the financial industry). I mean for someone with my background specifically, not for people in general. The word from those who have done both is that advantage gambling is an exceptional background for markets. It certainly looks that way to me. Basically I suspect some of the key pieces of the puzzle for successful investing (or trading) are simply ingrained in me at this point. I want to mention a few, for one thing to find out if you guys see carryover that could be a beneficial foundation for markets, and also in hopes that the perspective from the pro gambling world might be useful for you in your investing and trading. I hear a lot about not letting emotions get the best of you as an investor or trader. I heard the same caution when I began gambling. Could just be survivorship bias, but I rarely encounter pros with this issue and I never had to "struggle" with it. I don't think it's a matter of self-control but rather an almost automatic consequence of the advantage gambling mindset. Simply: When we don't have an advantage, we don't bet. On a related note, we spend a lot of time scouting for opportunities. Just because we show up at a casino doesn't mean we're going to play. There have been times when I literally scouted through casinos for a month without playing a single round because I just couldn't find a "game," to use the vernacular. That sucked but again, I don't chalk it up to exceptional self-discipline that I didn't break down and start playing keno or something. Going hungry is no fun but it doesn't make shit suddenly sound appetizing. I believe there is overlap here with security analysis and Buffett's "Don't swing at every pitch." Again, the kind of advantage gambling I've gone after doesn't require the depth of discipline needed to be a great batter. You simply need a template for approaching casinos that makes money in the long run and that is very different from the approach used by casual gamblers. As one friend-turned-coworker of mine said, "You've ruined casinos for me forever." I do some kind of valuation or risk assessment almost daily. Some I can do in my head, others on a napkin at the (complimentary) buffet, some via spreadsheet, and once in a while I have to code it up to get the answers I'm looking for. Obviously very different from the kind of valuation you do, but it's valuation work nonetheless. With that comes a ton of decision-making under uncertainty type work. Along with various rapid judgment calls during play, I also do a lot of sizing up potential opportunities. Like your work, these involve finding answers and synthesizing disparate sources of information. Lots and lots of practice deciding what to do with a given opportunity: dismiss outright, place on back burner, gather more info, pursue in-depth analysis, or simply head straight there and throw as much money at it as I can. Lots of errors along the way too, ie learning the hard way what it means to be operating outside your circle of competence. I'm accustomed to committing lots of money in situations where I know the edge is strong. Betting small when you have a monster edge is the wrong play, because monster edges are few and far between. The actual session by session wins and losses almost generally don't even register with me any more, I only pay attention to them insofar as ex post analyses are required for further confirmation of the thesis of the play or some other reason. The win or loss doesn't tell you anything, they're almost statistically meaningless as single data points. What registers to me is the expected return for the session. Repeating my broken record theme for this post, I don't ascribe my willingness to bet big to courage, nor my indifference to variance to an iron stomach. Rather, they happen as naturally as riding a bike once you have a proper mindset. That's probably enough. As I write, it sure seems to me like the habits and skills and experience would carry over nicely to investing and trading, but having never done it myself, I'd like to hear what you guys think. How good of a foundation does it seem like to you? What types of investing and/or trading are best suited for at-home investing as a long term side hustle, and what kind of prospects do you see for seriously pursuing it compared to passive indexing? What types of investing/trading aren't even worth bothering with unless you're looking to work on Wall Street? submitted by /u/coininthebarbarian [link] [comments]

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