Bruxelas já não vê “correção forte” nos preços das casas

[Mouro_Emprestado]

Fiz um pequeno edit, porque me tinha enganado logo no início na parte dos dividendos (queria evitar ETFs que distribuam dividendos e não os que capitalizem ).



Relativamente a um ETF europeu que replique, por exemplo, o S&P500 e capitalize dividendos, encontra-se por exemplo o "DB x-Trackers S&P 500 UCITS ETF 3C (EUR hedged)"

O problema é encontrar um ETF Europeu que replique o Vanguard VEU/VXUS. Não encontrei nada, razão pela qual preferi replicar a carteira doutra forma (Europeu e Ex-Europeu) e mesmo assim só encontrei aquele ETF sintético da Amundi

Podes, claro, diminuir a % da carteira europeia e aumentar a % da carteira extra-europeia, para aumentar a exposição a acções americanas. As % são um mero exemplo e não devem ser consideradas como verdade absoluta.

Obrigado pelos comentários.

[ruicarlov]

Bom dia Mouro_Emprestado,

Desde já, agradeço o pertinência do teu "post".

Analisando, os ETF em euros não são totalmente comparáveis aos ETF em dólares, nomeadamente no que diz respeito às acções. Basicamente, ficarias exposto a 50% em acções europeias e os restantes 50% em acções internacionais.

genericamente, 50% capitalização bolsista global corresponde ao mercado norte americano. Seria preferível usar um ETF que replique os índices norte americanos (S&P 500, pex.) e aumentar a exposição aos USA.

Claro que não sei será fácil encontrar um ETF em Euros que replique algum índice dos USA.


Cumprimentos,

MWC 2.0 (ex-MWC)

É menos complicado do que imagina. Já há umas páginas atrás coloquei a minha carteira alternativa que tentava replicar a do LTCM em euros e com capitalização de dividendos. Dentro das small caps USA, temos o iShares MSCI USA Small Cap UCITS ETF, com versões em $ e €.
Para um mais geral, há também o iShares MSCI USA B, que também pode ser negociado em €.

[mwc 2.0]

Na minha demanda para tentar replicar a carteira de 4 Fundos do Rick Ferri para um investidor Europeu, evitando ETFs que capitalizem dividendos, deixo abaixo uma sugestão (outras, claro, existirão):

Obrigações (30%):
Para os investidores americanos, é sugerido investir no “Vanguard BND” (Vanguard Total Bond Market).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por mais de 6000 obrigações, das quais 65% corresponde a Títulos de Tesouro dos EUA;
A duração média da carteira é de 5 anos e meio;
Tem uma dividend-yeld de 2,17% e distribui dividendos todos os meses (auch!);
O custo anual deste ETF é de 0,08%.

Tive problemas em encontrar um ETF semelhante que fosse suficientemente líquido e acabei por não encontrar nenhum fundo que capitalizasse dividendos.
O único que me pareceu mais razoável é o “iShares Euro Aggregate Bond UCITS ETF” (ISIN: IE00B3DKXQ41), destacando o seguinte:

Carteira constituída por mais de 1000 obrigações, dos quais a maioria corresponde a obrigações emitidas pelos Estados;
A duração média da carteira é ligeiramente superior a 7 anos;
Tem uma dividend-yeld de 2,22% e distribui dividendos semestralmente (menos mal, por causa das comissões);
Replica directamente o índice;
O custo anual deste ETF é de 0,25%.

Alternativamente, pode-se tentar procurar um Fundo de Investimento de Gestão Activa (FIGA) que vá capitalizando dividendos. Pessoalmente, vou usando o “Legg Mason Global Funds PLC - Legg Mason Brandywine Global Fixed Income Fund”, ainda que seja um estilo de obrigações diferentes.


Acções Domésticas (30%):
Para os investidores americanos, é sugerido investir no “Vanguard VTI” (Vanguard Total Stock Market).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por mais de 3500 acções americanas (assim inclui também empresas mid-cap e small-cap);
Tem uma dividend-yeld de 1,86% e distribui dividendos trimestralmente;
O custo anual deste ETF é de 0,05%.

No que respeita a ETFs Europeus, o mais global que é encontrei é o “db x-trackers Stoxx Europe 600 UCITS ETF DR” (ISIN: LU0328475792), destacando o seguinte:

Carteira constituída por cerca de 600 obrigações das maiores empresas europeias;[/li]
Não distribui dividendos;
Replica directamente o índice;
O custo anual deste ETF é de 0,14%.


Acções não Domésticas (30%):
Para os investidores americanos, é sugerido investir no “Vanguard VXUS” (Vanguard Total International Stock Market).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por mais de 5500 acções mundiais (excluindo acções americanas);
Tem uma dividend-yeld de 3,11% e distribui dividendos trimestralmente;
O custo anual deste ETF é de 0,14%.

No que respeita a ETFs Europeus, apenas encontrei um que aposta num índice accionista sem acções europeias: “AMUNDI ETF MSCI WORLD EX EUROPE UCITS ETF – EUR” (ISIN: FR0010756122).
Resumidamente, destaco o seguinte deste ETF:

É um ETF completamente sintético, pelo que não detém posições físicas (sinceramente, não é do meu agrado);
Como é um ETF sintético, não distribui dividendos;
O custo anual deste ETF é de 0,35%.


Real Estate (10%):
Para os investidores americanos, é sugerido investir no “Vanguard VNQ” (Vanguard REIT).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por cerca de 130 acções americanas;
Tem uma dividend-yeld de 3,69% e distribui dividendos trimestralmente;
O custo anual deste ETF é de 0,10%.

No que respeita a ETFs Europeus, destaco o “db x-trackers FTSE EPRA/NAREIT Developed Europe Real Estate UCITS ETF DR – 1C” (ISIN: LU0489337690).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por cerca de 90 acções europeias;
Não distribui dividendos;
Replica directamente o índice;
O custo anual deste ETF é de 0,40%.

O próximo passo a tentar fazer um backtest e comparar com a carteira americana.

Agradeço sugestões e comentários




Disclaimer: Não me responsabilizo por tentarem replicar o investimento acima sugerido. Quem o fizer, está por sua conta e risco.

Bom dia Mouro_Emprestado,

Desde já, agradeço o pertinência do teu "post".

Analisando, os ETF em euros não são totalmente comparáveis aos ETF em dólares, nomeadamente no que diz respeito às acções. Basicamente, ficarias exposto a 50% em acções europeias e os restantes 50% em acções internacionais.

genericamente, 50% capitalização bolsista global corresponde ao mercado norte americano. Seria preferível usar um ETF que replique os índices norte americanos (S&P 500, pex.) e aumentar a exposição aos USA.

Claro que não sei será fácil encontrar um ETF em Euros que replique algum índice dos USA.


Cumprimentos,

MWC 2.0 (ex-MWC)

[mushis]

obg mouro pela análise
penso que a real mais valia em escolher ETF europeus é que estes são cotados em €, eliminando assim o risco cambial.
Pena que continuem a haver poucos.

Será interessante analisar os resultados desse backtest. eu quando faço, faço aqui http://www.etfreplay.com/combine.aspx

[Mouro_Emprestado]

Na minha demanda para tentar replicar a carteira de 4 Fundos do Rick Ferri para um investidor Europeu, evitando ETFs que distribuam dividendos, deixo abaixo uma sugestão (outras, claro, existirão):

Obrigações (30%):
Para os investidores americanos, é sugerido investir no “Vanguard BND” (Vanguard Total Bond Market).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por mais de 6000 obrigações, das quais 65% corresponde a Títulos de Tesouro dos EUA;
A duração média da carteira é de 5 anos e meio;
Tem uma dividend-yeld de 2,17% e distribui dividendos todos os meses (auch!);
O custo anual deste ETF é de 0,08%.

Tive problemas em encontrar um ETF semelhante que fosse suficientemente líquido e acabei por não encontrar nenhum fundo que capitalizasse dividendos.
O único que me pareceu mais razoável é o “iShares Euro Aggregate Bond UCITS ETF” (ISIN: IE00B3DKXQ41), destacando o seguinte:

Carteira constituída por mais de 1000 obrigações, dos quais a maioria corresponde a obrigações emitidas pelos Estados;
A duração média da carteira é ligeiramente superior a 7 anos;
Tem uma dividend-yeld de 2,22% e distribui dividendos semestralmente (menos mal, por causa das comissões);
Replica directamente o índice;
O custo anual deste ETF é de 0,25%.

Alternativamente, pode-se tentar procurar um Fundo de Investimento de Gestão Activa (FIGA) que vá capitalizando dividendos. Pessoalmente, vou usando o “Legg Mason Global Funds PLC - Legg Mason Brandywine Global Fixed Income Fund”, ainda que seja um estilo de obrigações diferentes.


Acções Domésticas (30%):
Para os investidores americanos, é sugerido investir no “Vanguard VTI” (Vanguard Total Stock Market).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por mais de 3500 acções americanas (assim inclui também empresas mid-cap e small-cap);
Tem uma dividend-yeld de 1,86% e distribui dividendos trimestralmente;
O custo anual deste ETF é de 0,05%.

No que respeita a ETFs Europeus, o mais global que é encontrei é o “db x-trackers Stoxx Europe 600 UCITS ETF DR” (ISIN: LU0328475792), destacando o seguinte:

Carteira constituída por cerca de 600 obrigações das maiores empresas europeias;[/li]
Não distribui dividendos;
Replica directamente o índice;
O custo anual deste ETF é de 0,14%.


Acções não Domésticas (30%):
Para os investidores americanos, é sugerido investir no “Vanguard VXUS” (Vanguard Total International Stock Market).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por mais de 5500 acções mundiais (excluindo acções americanas);
Tem uma dividend-yeld de 3,11% e distribui dividendos trimestralmente;
O custo anual deste ETF é de 0,14%.

No que respeita a ETFs Europeus, apenas encontrei um que aposta num índice accionista sem acções europeias: “AMUNDI ETF MSCI WORLD EX EUROPE UCITS ETF – EUR” (ISIN: FR0010756122).
Resumidamente, destaco o seguinte deste ETF:

É um ETF completamente sintético, pelo que não detém posições físicas (sinceramente, não é do meu agrado);
Como é um ETF sintético, não distribui dividendos;
O custo anual deste ETF é de 0,35%.


Real Estate (10%):
Para os investidores americanos, é sugerido investir no “Vanguard VNQ” (Vanguard REIT).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por cerca de 130 acções americanas;
Tem uma dividend-yeld de 3,69% e distribui dividendos trimestralmente;
O custo anual deste ETF é de 0,10%.

No que respeita a ETFs Europeus, destaco o “db x-trackers FTSE EPRA/NAREIT Developed Europe Real Estate UCITS ETF DR – 1C” (ISIN: LU0489337690).
Resumidamente, destaco o seguinte deste ETF:

Carteira constituída por cerca de 90 acções europeias;
Não distribui dividendos;
Replica directamente o índice;
O custo anual deste ETF é de 0,40%.

O próximo passo a tentar fazer um backtest e comparar com a carteira americana.

Agradeço sugestões e comentários


Disclaimer: Não me responsabilizo por tentarem replicar o investimento acima sugerido. Quem o fizer, está por sua conta e risco.

[Mouro_Emprestado]

Achei interessante esta resposta do Larry Swedroe nos fóruns dos Bogleheads:

There are also some other issues that have been raised about the use of the CAPE 10. One relates to the issue that far fewer companies pay dividends than was the case in the past. Today, something like 60 percent of U.S. stocks don’t pay dividends, and 40 percent of non-U.S. don’t pay them. In the U.S. that has resulted in the dividend payout ratio on the S&P 500 falling from an average of 52 percent from 1954 through 1995, to just 34 percent from 1995 through 2013. http://philosophicaleconomics.wordpress ... 3/shiller/ At least in theory, higher retention of earnings should result in faster growth of earnings as those retained earnings are reinvested. And that has been the case for this particular period as from 1954 to 1995 real EPS growth rate averaged 1.72 percent, and from 1995 to 2013 it averaged 4.9 percent.
The website Philosophical Economics has a blog on this subject. The author explains that in order to make comparisons between present and past values of the Shiller CAPE, we need to normalize for differences in payout ratios. Making the adjustment between a 52 percent payout ratio (the average of 1954-1995) and a 34 percent payout ratio (the average since 1995) corresponds to around 1 point worth of Shiller CAPE.
The second issue relates to the change in accounting rules regarding writing off goodwill. As Philosophic Economics explains:
“In the old days, GAAP required goodwill amounts to be amortized–deducted from earnings as an incremental non-cash expense–over a forty year period. But in 2001, the standard changed. FAS 142 was introduced, which eliminated the amortization of goodwill entirely. Instead of amortizing the goodwill on their balance sheets over a multi-decade period, companies are now required to annually test it for impairment. In plain english, this means that they have to examine, on an annual basis, any corporate assets that they’ve acquired, and make sure that those assets are still reasonably worth the prices paid. If they conclude that the assets are not worth the prices paid, then they have to write down their goodwill. The requirement for annual impairment testing doesn’t just apply to goodwill, it applies to all intangible assets, and, per FAS 144 (issued a couple months later), all long-lived assets.”
While FASB 142 may be a more accurate method of accounting, it has created an inconsistency in earnings measurements with the present values end up looking more expensive relative to the past than they actually are. And the difference is dramatic. While the CAPE 10 as now measured is about 24.9, adjusting for the accounting change would put it about 4 points lower. http://philosophicaleconomics.wordpress ... 3/shiller/
If we combine the two adjustments of 1 for the lower dividend payout and 4 for the FSB 142 change, the current CAPE 10 at 24.9 which looks way above the mean, doesn’t look so overvalued at a now 19.9. In fact, that’s right about in line with it’s average since 1960. Which begs the questions:
a) Are stocks really overvalued or just highly valued (meaning returns are likely to be lower than historical levels, but that there is no reason to expect a major correction due to RTM)?
b) To what mean should the CAPE ratio revert: The 16.5 mean of the past 113 years, or the 19.6 mean since 1960?
These three points — that over time it’s logical to believe that the equity risk premium for U.S. stocks might have fallen, the accounting change regarding write offs, and the lower payout ratios — provide us with plausible explanations that the CAPE 10’s high level is not signaling a massive overvaluation of U.S. stocks, setting the market up for a major correction as Jeremy Grantham has been forecasting. As a caution, there might be some compelling “stories” on the other side. For example, some have stressed that changing executive compensation practices in the past 20 years have increased the incentives of executives to manage earnings. So at very least one should be cautious about using the Shiller CAPE 10 as a measure of whether is overvalued or undervalued.

DISCLAIMER:
Apenas sei que nada sei.
Ganhos passados não garantem ganhos futuros.

[LTCM]

Mr. Freeman, 60, has been leading the Aggressive Growth fund since its founding in 1983. He's one of just 17 managers in Morningstar Inc. 's database running the same portfolio for the past three decades. (In fact, out of nearly 7,500 mutual funds, only 362 were around 30 years ago.) His co-manager, Evan Bauman, jokes that he is the new guy, at 38 years old and with 18 years in the markets under his belt.

Over the 15 years through April, the fund beat the S&P 500 by an average of 4.5 percentage points a year. For the past five years, Aggressive Growth is ahead of the index by an average of 4.7 percentage points a year and has beaten 99% of its competition in Morningstar's large-growth category. Over the past year, the fund is up 27.3%, while the S&P 500 is up 20.4%.

The fund's recent performance comes in part thanks to stocks purchased by Mr. Freeman decades ago. Top holding Biogen Idec Inc. is up 26% over the past year, and entered the portfolio in 1991. Mr. Freeman first started buying the fund's No. 3 position, Forest Laboratories Inc. —up 146% the past 12 months—in 1983. "We could have been scared out of that position many times," he says.

Health care, in particular biotechnology, has been an area of emphasis because of innovation. Says Mr. Bauman: "We're looking for companies that have sustainable, competitive advantages and can grow in any environment."

With turnover of just 2% a year, flexibility has become a trademark of the fund's holdings, says Mr. Bauman. For example, when the fund bought shares of SanDisk Corp. in 2001, it was specialized in flash memory. Today it is focused on cloud computing. Shares are up 63% over the 12 months through April. Another common theme: companies that generate lots of cash, such as Comcast Corp. , picked up in 1986—and Anadarko Petroleum Corp.

Lately, mergers and acquisitions have helped. In just the past year, seven fund holdings, including Comcast, Amgen Inc. and Forest Labs, have been on one side of a deal or the other.

"Companies are not just talking about how much cash they have, but they are now putting it to work, taking advantage of low rates and open capital markets," says Mr. Bauman.

Of course, no track record is without blemishes. In 2008, Aggressive Growth fell 42.1%, more than five percentage points worse than the S&P 500.

[LTCM]

[LTCM]

To better educate our audience, we offer 101 ETF fun facts that many investors probably are not aware of.

[VirtuaGod]

Mais simples visualização para os perguiçosos

[LTCM]

[Mouro_Emprestado]

"Roubado" doutro fórum:

"If you look at the fees that are extracted by Wall Street, on balance, they've gotten quite substantial compared to 25 years ago."

"Investors should own a basket of highly diversified index funds or index ETFs, thus getting the lowest possible cost and the best, most reliable long-term return."

"The single most reliable indicator of a mutual fund's future performance is cost: Low fees equals better returns."

"The fundamental argument made by Jack Bogle, founder of the Vanguard Group: Keep things cheap by design and you cannot help but outperform."

"Vanguard was built to stay cheap by virtue of its ownership, the shareholders of the funds themselves. "The only way anyone can really compete with us on costs is to adopt a mutual ownership structure," Bogle said. "I've been waiting all these years for someone to do it, but no one has."

"Management fees have stayed high, on the order of 1% and even higher. Add in the underlying mutual funds they buy and you could be paying 2.5% or more. Then consider the costs of heavy trading, which are substantial and come right out of your portfolio. It adds up. Just owning the index, meanwhile, costs a tiny fraction of all that while providing a solid, reliable, compounding return. Anyone could do it and everyone should."

http://www.marketwatch.com/story/warren-buffett-small-investors-have-one-big-advantage-2014-05-01?pagenumber=1

[O Alquimista]

You can’t take the same actions as everyone else and expect to outperform.

Esta e outras pérolas podem ser consultadas em Dare to be great e Dare to be great II de Howard Marks (Oaktree Capital).

[Cem pt]

Referencing a book by famed investment advisor Charles Ellis called Winning the Loser’s Game: Timeless Strategies for Successful Investing, Marks said he doesn’t play “winner’s” tennis — he plays “not-loser’s” tennis. “If you think you can see the future and the world is going to go according to your decisions, go for winner’s tennis. But if you think the world is full of randomness and uncertainty, spend your time trying to avoid losers.” The Oaktree model is based on the latter, Marks noted: If we avoid the losers, the winners will take care of themselves. “If we can make a large portfolio of investments where none of them [strike out], then we’ll have … no bad ones to pull down the average.”

Uma grande verdade que subscrevo em absoluto.

[LTCM]

Referencing a book by famed investment advisor Charles Ellis called Winning the Loser’s Game: Timeless Strategies for Successful Investing, Marks said he doesn’t play “winner’s” tennis — he plays “not-loser’s” tennis. “If you think you can see the future and the world is going to go according to your decisions, go for winner’s tennis. But if you think the world is full of randomness and uncertainty, spend your time trying to avoid losers.” The Oaktree model is based on the latter, Marks noted: If we avoid the losers, the winners will take care of themselves. “If we can make a large portfolio of investments where none of them [strike out], then we’ll have … no bad ones to pull down the average.”

[LTCM]

The year so far doesn’t really have any surprises: Russia was the driver at both ends, with Russian stocks doing the worst, and maize (corn) and wheat doing best, thanks to fears of disruption to Ukraine’s harvest. Other notable returns this year have been the result of the eurozone peripheral bond rally, boosting peripheral banks, which in turn led up their local stock markets, Italy’s in particular.

One point of note for returns so far this year: both gilts and bunds have beaten the S&P 500 even in the local currency terms favoured by Deutsche. In common currency terms gilts are way ahead of US equities, as is the Footsie:

[mushis]

Boas,

passados 2 anos volto a este topico iniciado pelo LTCM.

hoje posso dizer que sou uma pessoa diferente, nao enriqueci monetariamente, mas este topico, que li algumas vezes, foi o ónus para eu me interessar por investimentos e compreender melhor o mundo q me rodeia. Nao diria que mudou a minha vida, mas quase

Agradeço a todos os que contribuem aqui. Ainda se fala muito de assuntos que já se falavam na altura, dupla tributação, qual o melhor broker, etc. eu cá investi logo que me senti confortável para o fazer, usando o BTP. já me passou pela cabeça mudar, pelas razões já descritas aqui, mas ainda nao o fiz.


resta me agora retomar as leituras.
boas leituras, bons negócios

[LTCM]

From my point of view, the time horizon is one of the main drivers in the selection process. If an investor wants to build a tactical and therefore short term position within emerging markets, it might be better to choose a passive product for this purpose, as active managed funds do normally need longer time horizons to deliver their full outperformance potential, as the so called alpha is normally generated over time, i.e. a full market cycle. In addition active management means that the fund manager normally will not buy all the securities of his benchmark and therefore will out- or underperform the market. In contrast, passive products are built to replicate the returns of the market as exactly as possible. A passive fund has only a very limited potential to outperform the market, but exactly for this reason it might be the product of choice for a short-term investment in a sharply rising market.

Generally it can be said that investors with a short-term investment horizon should choose an ETF or other passive product to build exposure to emerging markets. Long-term investors might use actively managed funds for this purpose, since these products might generate outperformance. However, market observations show it may be hard to find the right fund for this purpose, as explained in the next section.

[LTCM]

The Alternative Investment Management Association (AIMA), the global hedge fund industry body, has published a new educational guide to understanding hedge fund performance.

The guide, ‘Apples and apples: How to better understand hedge fund performance’, says comparing hedge fund performance to the S&P 500 can be an “apples and oranges” comparison and proposes five steps to improve understanding of hedge fund performance.

The study reveals that hedge funds consistently outperform US equities (as measured by the S&P 500), global equities (MSCI World) and global bonds (Barclays Global Aggregate ex-USD Index) on a risk-adjusted basis, a crucial measure for investors. Even during the stock-market rally of recent years, hedge funds performed better on a risk-adjusted basis than the S&P 500 and MSCI World, according to the guide.

To download ‘Apples and apples - click here

[Pata-Hari]

Fabuloso! Obrigada!

O curioso é que se os bancários disserem tudo isto, perdem automaticamente os clientes. Ninguém gosta de dar o seu dinheiro a quem diz que não sabe. As pessoas só confiam em gente que tem todas as certezas do mundo.

[AmigosdaBolsa]

Um artigo relativamente extenso mas interessante.
Já partilhei com outros possíveis interessados e um obrigado pela partilha.

[Tridion]

LTCM por acaso não foste tu que escreveste esse artigo, não? Tens escrito muitas coisas semelhantes ao longo dos tempos, o que para mim é de uma visão absolutamente avassaladora. Se nos States este tipo de vozes são uma pequena minoria, em Portugal és tu basicamente

O artigo é muito bom e divertido...manda mais!

[Gonee111]

wow, um post fora do normal, muito interessante essa partilha.

[LTCM]

In the history of capitalism, this is the hardest time ever to invest. People are going broke, losing their jobs, and fear more than greed rules the news and tries to rule thoughts.

In short: people are scared. And I do think the uncertainty is going to rise quickly so I wanted to put this note together.

In 2001 and 2002 I lost all my money through bad investing. The same thing happened to me on a couple of occasions after that.

So why should anyone listen to me about investing? You shouldn’t. You shouldn’t listen to anyone at all about investing. This is your hard-earned money. Don’t blow it by listening to an idiot like me.

The most important three words in investing is: “I don’t know”. If someone doesn’t say that to you then they are lying.

I was preparing this morning for my podcast conversation I am having tomorrow with Stephen Dubner, co-author of Freakonomics and the upcoming “Think Like a Freak”. One of the statistics he points out is that CXO Advisory Group polled the predictions of 500 investment strategists and pundits. The “experts” had a 47% success rate. Good luck if you listen to any of them.

Here’s my experience (and perhaps I’ve learned the hard way about what NOT to do and a little bit about what TO do.):

I’ve run a hedge fund that was successful. I ran a fund of hedge funds, which means I’ve probably analyzed the track records and strategies of about 1000 different hedge funds.

I’ve learned ONE MAJOR THING, which I will repeat below: ALL OF WALL STREET IS A SCAM. There are zero exceptions.

I’ve been a venture capitalist and a successful angel investor (I was a HORRIBLE venture capitalist though – but I put that under the category of “does not work well with others”).

I can’t raise money anymore. Nor do I want to play that game. I don’t BS about my losses and everyone else does.

So I’m not in that business anymore. It’s too much work to run a fund anyway.

In the past 15 years I’ve tried every investing strategy out there. I honestly can’t think of a strategy I haven’t experimented with.

I’ve also wrote software to trade the markets automatically and I did very well with that but that industry is now dominated by the high frequency guys.

And I’ve written several books on my experiences investing, with topics ranging from automatic investing to Warren Buffett, to hedge funds, to long-term investing (my worse-selling book, “The Forever Portfolio”, which has sold 399 copies since it came out in December 2008, including one copy for the entire last quarter).

Incidentally, why publish a book called “The Forever Portfolio” during the worst financial crisis in history. I begged my publisher (Penguin) to postpone but they couldn’t. “It’s in the schedule” was their magic incantation. Publishers largely suck. The good news is: they will never make back the advance.

That said, all of the picks in that book have done excellently since then (Claudia proved this in a review of the book on Amazon but then was shamed into admitting she was my wife, which she did not at first disclose) but the one thing I am proud of is that I made a crossword puzzle for the book. I don’t know of any other investing book with a crossword puzzle in it.

So, Ok! Let’s get started. Don’t follow any of my advice. This is advice that I do and follow and it works for me.

A) SHOULD I DAYTRADE?

Only if you are also willing to take all of your money, rip it into tiny pieces, make cupcakes with one piece of money inside each cupcake and then eat all of the cupcakes.

Then you will get sick, and eat all of your money, but it will taste thrilling along the way. Which is what daytrading is.

B) I DON’T BELIEVE YOU. MANY PEOPLE DAYTRADE FOR A LIVING.

No. I personally know of two. Maybe three. And they work 24 hours a day at it and have been doing it for a decade or more. So unless you want to put in that amount of time and be willing to lose a lot first then you shouldn’t do it.

One more thing: when you daytrade and lose money it’s not like a job.

When you go into a job you NEVER lose money. If you show up for two weeks, you get paid. Even if you have been warned repeatedly about sexual harassment you still get paid. You might get fired but they won’t take your money.

The stock market TAKES your money on bad days.

Sometimes it takes a lot of your money. We’re not used to the brutality of that and it can destroy a person psychologically, which makes one (me) trade even worse.

C) WELL, WHO MAKES MONEY IN THE MARKET THEN?

Three types of people:

People who hold stocks FOREVER. Think: Warren Buffett (has never sold a share of Berkshire Hathaway since 1967) or Bill Gates (he sells shares but for 20 years basically held onto his MSFT stock).
People who hold stocks for a millionth of a second (see Michael Lewis’s book “Flash Boys” which I highly recommend.) This is borderline illegal and I don’t recommend it.
People who cheat.

I’ve seen it for 20 years. I’ve seen every scam. I can write a history of scams in the past 20 years.

Without describing them, here’s the history: Reg S, Calendar trading, Mutual fund timing, Death spirals, Front running, Pump and Dump, manipulating illiquid stocks, Ponzi schemes, and inside information. Inside information has always existed and always will exist. Those are scams from just the past 15 years. If I went back 50 years the list would be fifty times as big.

ONE TIME I WANTED TO RAISE MONEY for one of my funds. I went to visit my neighbor’s boss. The boss had been returning a solid 12% per year for 20 years.

EVERYONE wanted to know how he did it. “Get some info while you are there,” a friend of mine in the business said when he heard I was visiting my neighbor’s boss.

The boss said to me, “I’m sorry, James. We like you and if you want to work here, then that would be great. But we have no idea what you would be doing with the money. And here at Bernard Madoff Securities, reputation is everything”.

So I didn’t raise money from Bernie Madoff although he wanted me to work there. Seemed like a very nice guy.

I was depressed when I left his offices in the so-called “lipstick building”. Why will I never be good enough? I thought.

Later, the same friend who wanted me to get “info” and “figure out how he does it” said to me: “we knew all along he was a crook.”

Which is another thing common in Wall Street. Everybody knows everything in retrospect and nobody ever admits they were wrong.

Show me a Wall Street pundit who says “I was wrong” and I’ll show you…I don’t know…something graphic and horrible and impossible [fill in blank].

Remember the magic words.

“I”. “Don’t”. “Know”.

D) So how can one make money in the market?

I told you about: #1. Pick some stocks and hold them forever. Since “I don’t know” applies, it’s almost impossible to pick the right ones.

E) What stocks should I hold?

Warren Buffett has some advice on this (and I know because I wrote THE book about him. A friend of mine who knows him told me my book was the only book that Buffett thought was accurate about him).

So since I don’t know anything, I will let Warren Buffett take over here.

He says, “if you think a company will be around 20 years from now then it is probably a good buy right now.”

I would add to that, based on what Warren does. It seems to me he has five criteria:

A company will be around 20 years from now.
At some point, company’s management has demonstrated in some way that they are honest, good people. If you can get to know management even better.
The company’s stock has crashed for some reason (think American Express in early 60s, which he loaded up on. Or Washington Post in the early 70s. Or Coca-Cola in the early 80s).
The company’s name is a strong brand: American Express, Coke, Disney, etc.
Demographics play a strong role.

With Coke, Buffett knew that everyone in the world would be drinking sugared water before long. Who can resist? He also started buying furniture companies right before the housing boom. He knew that as the population in the US grows, people will need chairs to sit on.

Note that Buffett is not what some people call a “Value investor”. But I won’t get into that discussion here.

F) WHAT ELSE?

One time I accidentally got an email that was intended for a famous well-known investor. It was from his broker and contained his portfolio. I can’t say how this accident happened but it did.

Of course, I opened the email.

This is a man who writes about lots of stocks.

His entire portfolio was in municipal bonds.

I don’t know whether or not municipal bonds are good investments. But I would look into stocks that are called “closed-end funds” that invest only in municipal bonds.

They usually pay good dividends, usually trade for less than their cash or assets in the bank, and are fairly stable (it’s very hard for a municipality to not pay back its debts for various reasons, some of them constitutional).

But do a lot of research into the towns.

I’ll tell you one story. I had an idea for a fund in 2008 when oil was crashing at the end of the year.

Stocks / funds that invested in municipal bonds in Texas were getting destroyed. Somehow, because oil was going down, everyone naturally assumed that Texas was going to simply disappear. I assumed that most people were wrong about Texas.

I researched every municipal bond out there and found a good set of Texan cities that were being sold off with everyone else even though they had nothing to do with oil.

I pitched it to a huge investor who had told me he wanted to back me on any idea I could come up with.

He loved the idea. He loved it so much he didn’t invest with me and a few weeks later he told me, “We now have about $500 million in this strategy and we bought the very stocks you are recommending.”

I don’t know what to think about this. That’s Wall Street.

They went up over 100% in the next six months while the world was still in financial collapse. So he made a lot of money.

As for me, I didn’t put a dime into my own strategy and made nothing.

But that’s my fault.

In investing, you never have anyone to blame but yourself. Blaming is draining.

G) SHOULD I PUT ALL OF MY MONEY IN STOCKS?

No, because you’ll never know anything about a company and you won’t get the kind of deals that Warren Buffett gets.

So use this guideline:

no more than 3% of your portfolio in any one stock. But if the stock grows past 3% you can keep it. To quote Warren Buffett again: “If you have Lebron James on your team, you don’t trade him away.”
no more than 30% of your portfolio in stocks (unless some of the stocks grow, in which case you just keep letting them grow).

G, PART 2) WHAT IF WE ARE IN A BUBBLE?

Some hedge fund manager (David Einhorn) just said we might be in a tech bubble. Back to rule #1: He doesn’t know. It’s just a headline.

Bubbles don’t mean anything. We had an internet bubble in the 90s. Then a housing bubble. Bubbles bubbles bubbles. And if you just held through all of that, your stock portfolio right now would be about a percent from all-time highs.

So ignore cycles and bubbles and ups and downs.

AND NEVER EVER read the news. The news has no idea about the financial world and what makes it tick. Any investing off the news is like taking out your eyes because you trust a blind person to drive you to work.

H) MY FRIEND HAS A BUSINESS IDEA. SHOULD I INVEST IN IT?

Probably not. But if you want a checklist, make sure these four boxes can be checked:

The CEO has started and sold a business before.
The business is a sector with a strong demographic headwind behind it. (or is that a tailwind?)
The company has revenues and/or profits.
You are getting a really good deal. (This is subjective but you can look at similar companies and what they were valued at.)

I can say this: every time I have invested with this approach it’s worked miracles. And every time I have not invested in this approach it’s been a DISASTER. Like, a CLUSTERF*(*K

Claudia doesn’t let me invest in a private company unless all four items on my checklist apply. It’s good to be able to say, “I love your idea but my wife won’t let me invest.”

After that, they usually say something like (….. you can imagine…) but I don’t care. I get to keep the money in my wallet and not give it to them.

Which is important because I tend to believe in everything people tell me.

I) WHAT DO YOU THINK OF BITCOIN?

I think bitcoin has about a 1 in 100 chance of being a survivor. So I have 1% of my portfolio in bitcoin. I can write a lot more on bitcoin. I sold “Choose Yourself” in bitcoins before the book was officially released. Bitcoin went up 500% after that.

I can explain everything about bitcoin but I can’t explain the future. So we’ll see.

J) WHAT ABOUT METALS AS A HEDGE AGAINST INFLATION?

No, they have zero correlation with inflation. The best hedge against inflation is the US stock market since about 60% of revenues of the S&P 500 comes from foreign countries.

K) WHAT ABOUT METALS LIKE GOLD? DON’T THEY HAVE INTRINSIC VALUE?

The only currency in the history of mankind that had actual intrinsic value was when people traded barley in the markets of the ancient city of Ur. Since then, we’ve developed currencies that depended on our faith in their value.

Every currency has faith and hope backing it. When people began to lose faith in US currency (in the Civil War), the words “In God We Trust” were put on the dollar bill to trick people into having faith in it.

But if you’re going to pick a metal, wait until the gold/silver ratio gets higher than it’s historical average and buy silver.

How come? Because silver is both a precious metal (like gold) and an industrial metal (also like gold, but much much cheaper). So there actually is some intrinsic value in silver.

I bought some silver bars back in 2005. But then lost them when I moved. That’s why nobody should listen to me about investing.

L) WHAT ABOUT MUTUAL FUNDS?

No. Mutual funds, and the bank representatives that push them, consistently lie about the fees they are charging. I know this from experience.

One time I accompanied a friend of mine who had made some money (she was a model and had a good run for awhile) and was looking to invest it. She asked me to go with her to see her bank representative who had some “ideas”. Because she was beautiful, I went with her to the bank.

I didn’t talk at all during the meeting but jotted down every time the bank guy lied. He lied five times.

Afterwards I explained each of the lies to her.

What happened? She put all her money with the guy. “He’s practically family”. I can’t argue with a good salesman.

But he lied about the mutual funds’ performance that he was pitching, the fees they were charging, the commissions he was charging, and a few more I can’t remember now. I wrote an article about it in the Financial Times back then.

Fact: Mutual funds don’t outperform the general market so better to invest in the general market without paying the extra layer of fees.

Use the criteria I describe above, pick 20 companies and invest.

M) WHAT ARE SOME GOOD DEMOGRAPHIC TRENDS?

The internet. Yes, it’s still growing.
Baby boomers retiring. They need special facilities to live in. They need better cancer diagnostics and treatments.
Energy. The more people we have, the more energy we will consume. Go for energy sources that are profitable and don’t need government subsidies. Whenever you depend on the government, you could get in trouble.
Temp staffing. Every company is firing people and replacing them with temp staffers.
Batteries. If you can figure out how to invest in Lithium, then go for it.
and a dozen others. Feel free to list more in the comments. I plan on covering more in my email newsletter.

N) IS A HOUSE A GOOD INVESTMENT?

Everyone will disagree with me on this but the answer is an emphatic “NO!”

It has all the qualities of a horrible investment:

a) Constant extra layers of fees and taxes that never go away (maintenance, property taxes, etc that all rise with inflation).

b) Usually housing is too-large a percentage of someone’s portfolio. Even just the down-payment ends up being the largest expense of someone’s life.

c) Usually massive debt is involved.

If you can avoid, “a”, “b”, and “c” and don’t mind the opportunity cost in the time required to maintain your house then go for it. Else, rent, and use the money you saved for other investments that will be less stressful and pay off more.

Fact: Housing has returned 0.2% per year in the past 100 years.

O) IF NO HOUSING AND ONLY 30% OF MY PORTFOLIO IN STOCKS, THEN WHAT SHOULD I DO WITH THE REST OF MY MONEY?

Why are you in such a rush to put all of your money to work? Relax! Don’t do it!

There’s a saying “cash is king” for a reason. I will even say “cash is queen” because on the chessboard the king is just a figurehead and the queen is the most valueable piece.

Cash is a beautiful thing to have. You can pay for all of your basic needs with it.

You can sleep at night knowing there is cash in the bank.

I love a stress-free life. When I look back at the past 15 years, the times when I’ve been most stressed is when I’ve been heavily invested and the times when I’ve been least stressed is when I had cash in the bank.

With cash in the bank you can also invest in yourself.

P) WHAT DOES THAT MEAN, “INVEST IN MYSELF?”

it costs almost nothing to start a business. Find something people want and start posting information about it on a blog and then upsell your services on the blog.

Or write 1000 small books about different topics and publish them on Amazon. You can do this on the side while you learn and have a full time job and then when you are ready, you can jump to your other passive streams of income. I have a podcast coming up soon with a guy who makes $25,000 a month doing this.

Note: It takes a lot of work to find “passive” income but when it happens, it’s worth it.

These are some ideas. There are many others.
Invest in experiences rather than possessions.

Figure out interesting and unique experiences you can have or places you can go to (but they don’t always have to be places).

Experiences pay much higher dividends than an extra TV or a nicer car.
Books. Reading is the best return on investment. You have to live your entire life in order to know one life.

But with reading you can know 1000s of people’s lives for almost no cost. What a great return!

Q) SHOULD I SAVE MONEY WITH EACH PAYCHECK?

No. Just try to make more money. That is easier than saving money. I find that whenever I try to save money I end up spending more. I don’t know why that is. I’m a horrible spender, which is probably why I’ve gone broke so many times.

Better to just make more with many streams of income so you don’t have to worry about going broke. And then saving will come naturally as you make more money.

Don’t forget that a salary will never make you money. After taxes and the daily grind, and your exhaustion and the feelings of “I hate my job”, and then inflation and then new expenses (kids), you will never be able to save. Avoiding Starbucks every day won’t make you a millionaire, that’s a fact.

I say it glibly, “try to make more money”. I know it’s not that easy. But in the long run, if you have a constant focus on alternative ways to make more money, then you will.

R) WHAT ELSE SHOULD I DO WITH MY MONEY?

Forget about it.

Money is just a side effect of health.

I talk a lot about the daily practice I started doing when I was at my lowest point.

I know now after years of doing it that it has worked. I’ve done very well with it, and I started doing it when I was dead broke, lonely, angry, depressed, and suicidal.

I didn’t start it from a position of privilege.

And you don’t have to buy my book. I’m not selling anything.

Here’s the whole thing: stay physically healthy in whatever way you know how (sleep well, eat well, exercise). Be around good people who love you and respect you and who you love and respect, and be grateful every day.

Think of new things each day (or all day) to be grateful for. “Gratitude” is another word for “Abundance” because the things you are most grateful for, become abundant in your life.

And finally, write down 10-20 bad ideas a day. Or good ideas. It doesn’t matter. After exercising my idea muscle for six months, I felt like an idea machine. It was like a super power that just wouldn’t stop. More on this in another post.

Money and abundance in your life is a natural side effect of the above. I know this for myself but now since writing about it for almost four years I can tell you from the letters I get that it works for others.

S) WHAT’S IN IT FOR YOU?

I don’t know. I used to write about money stuff because I wanted investors, or I wanted to sell books, or get speaking engagements. Now I want none of that.

I HATE WRITING ABOUT FINANCE NOW. Because it’s almost all bullshit and I don’t want to be like the other BS.

But I get worried that in a world of increasing economic uncertainty that more and more people are getting “stuck” and getting lied to and are scared about what is happening.

Most people will think I am giving bad advice. That’s fine. I probably am. I just am trying to avoid the BS and I hope do also.

Too many people I know are nervous and depressed.

There’s nothing else to know about investing your money. If your bank tries to give you any advice just say, “thanks but I’m ok”.

If they want you to put your money in a savings account, even “so you can get the interest” I would politely decline. There’s a reason they are asking you to do this and I have no idea what it is but it’s not good for you.

You won’t get rich investing your money but you can do very well. And if you combine that with investing in yourself, you will get wealthy.

But only if you remember that financial wealth is a side effect of real inner wealth.

This is the most powerful investment you can do with your time and your life.

You can always make money back when you’ve lost it.

But one single split moment of stress and anxiety you will NEVER make back again.

Investing in the future will never bring back the past.

To be able to sit and not have a million stressful thoughts racing through your head. To be able to appreciate everything around you for the abundance it is.

Most people think they need to say “thank you” to the world.

But the world is constantly saying “thank you” to you for being alive, for creating new things, new energies, new experiences.

Every day give the world at least one more reason to whisper “thank you” to you.

If you can hear that whisper, everything else, every gift in life, becomes expected. You earned it.

Just take it.

[ghorez]

http://www.bloombergview.com/articles/2 ... cmpid=view

Why Investors Love Hedge Funds

Barry Ritholtz
time iconApr 21, 2014 8:05 AM EDT

Larry Swedroe, research director for BAM Advisor Services LLC, noted earlier this month that total hedge fund assets under management, or AUM, reached $2.63 trillion. This represents a sizable increase, despite fund performance generously described as lackluster.

The increase in assets under management led to some interesting discussions. Lots of readers had e-mailed me with comments on both alpha -- market-beating returns -- and fee generation after last week’s column, ``The Hedge-Fund Manager Dilemma.''

There is much more nuance to the discussion of hedge funds than is widely understood. Today is a good time to review some of the related issues. Let’s see if we can clarify some misunderstandings:

Some hedge funds generate a lot of alpha: Given the underperformance of the industry, why do so many investors want to participate in hedge funds? The most likely answer is the enormous alpha generated by a handful of star managers.

Last week, this came up in an interview with Jim Chanos of Kynikos Associates (I’ll post a link when its released). Chanos started Kynikos in 1985, when there were only a few hundred hedge funds. The concentration of talent -- and alpha generation -- became the stuff of legend.

What has changed is the sheer number of funds and the amount of assets they manage. What hasn’t changed is the reality that the best performers capture a disproportionate amount of alpha. The 9,500 new me-too funds are not, according to the most recent data, keeping up with the top hundred funds. Indeed, they are not even keeping up with their benchmarks.

Beating the market is hard: This is obvious, but let’s give some context. Outperformance is a rare and elusive thing. Consistently outperforming in any given five-year period is harder still. Add in the standard 2 & 20 fee structure (a 2 percent management fee along with 20 percent of any gains) , and managers must overcome the enormous drag on returns. Net of fees and costs, we hunt for the rarest of creatures: Funds that earn their keep. It is no wonder that so few funds can meet that challenge. But the lure of outperformance is only one aspect of their appeal.

Cognitive bias and behavioral driven investing: Meir Statman, a professor at Santa Clara University in California, focuses on the cognitive errors that investors make.

In a 2011 interview, Statman noted that people want more than just returns from their investments. They are also looking for the “status and esteem of hedge funds,” he said. It isn't that different from “the warm glow and virtue of socially responsible funds” that send some investors in that direction. In both instances, performance takes a back seat to the emotional warm fuzzies investors feel. That feeling of belonging to a special club is why some high-net-worth investors are willing to pay up for mediocre performance. It grants them entrée to a sophisticated world they might not otherwise have.

We see this reflected in the mind share hedge funds occupy. Despite managing a relatively small percentage of total investable assets, they capture an unusual amount of media coverage. This may add to the overall mystique.

Selecting emerging managers: Experience has shown us this is an exceedingly difficult task. Beyond our own biases, it simply is a challenge to identify which managers will generate consistently good performance in the future.

The evolution of what happens to successful emerging funds helps to explain why. Some new managers identify unique alpha opportunities. These situations tend to be of modest size, perhaps a few billion dollars worth of market inefficiencies. Often, the emerging funds’ success attracts competitors, and the finite amount of alpha in that area gets fully mined. Very often, we see their success attracting lots of new capital, far in excess of what their niche can support and still generate market-beating returns. Sometimes, their success was simply random, a function of luck, and can't be repeated or duplicated.

Hence, we are faced with a situation where fees are high, outperformance is rare, and our own biases undercut our ability to select managers.

Note that we haven't gotten to the issues of hedging, market timing and stock selection. I plan on visiting these topic in a future discussion.