My husband has been watching Fast Money and Jim Cramer for about 3 years and now is doing stock picking with a buddy who has some finanancial investment experience.
I put on my headphones when Mad Money comes on CNBC and try to stay non-judgmental. But SO agree with the comments upthread - how does one think that the market can be outplayed (as a neophyte layperson) when there are people with 30 years experience, advanced finance degrees, and loads of inside track info playing it?
The friends I know who mention stock-pick methods do it as a hobby (one as part of an investment/socializing club), with small money they could afford to loose. Perhaps others do and donāt talk about it, but I get the sense that they, like us, are mostly in index funds.
I mean Iāll admit I do stock pick for my own portfolio although I have to clear every single trade which becomes a real nuisance as I could be stuck in a position if my firm is also selling the position. But I believe the market isnāt even weak-form efficient and therefore stock picking is logically consistent with my beliefs.
I mainly run a core-satelite model where the core is invested in an index and the rest I individually stock pick + buy e-minis/gamble.
As mentioned above though, I definitely donāt think investing in individual securities makes any sense.
Does he use the āinverse-Cramerā portfolio (shorting anything he recommends)? That seems to have been quite successful lately, given Cramerās recommendations of companies like First Republic.
Edit: apparently the strategy gave stellar returns in 2022 but the more bullish market over the last couple of months has not been so good:
The main reason people should pay financial advisor fees is advice. If your advisor is just managing assets, I personally dont think itās worth it.
Good advisors should have working knowledge of core financial planning principles including tax strategies, social security, medicare, risk protection and estate planning.
Active management != financial planning.
Thereās nothing wrong with financial planning.
Nothing wrong with active management either - I would do all sorts of things to be allowed to invest in Citadelās Wellington Fund (theyāre not open to investors like myself).
Their returns are absolutely legendary - they even returned 38% in 2022 while equity markets absolutely crashed + bonds became positively correlated.
A $10,000 investment in 1990 in the Wellington Fund would have returned $1.3 million by 2018.
Are you considering losses to fees? The fee structure doesnāt appear to be public, but one article mentions 5-10% per year + 20% performance fee on profits, quoting an anonymous source. The fees seem high enough to have a notable impact on overall return for an investor.
One also needs to consider survivorship bias influencing past performance being an accurate prediction of future success. The large portion of funds that donāt perform well often donāt last. Iām not saying this particular fundās success was due to random chance, but in a hypothetical situation where degree of success is primarily due to random chance, a few funds are going to randomly be multiple SDs beyond the mean for their risk level. When looking at these successful funds, it can be difficult to identify what portion of past return is due to luck and what portion of return is likely to continue in the future.
For example, I ran a search for the best performing hedge fund over a multi-year period in 2010. By far the biggest winner was Paulson Credit Opportunities . Nobody else even came close. The fund did especially well in the subprime mortgage crisis and recession. When most were losing in a challenging market, they made large gains. Itās been frequently compared to the one you mentioned for a variety of reasons including the 2 funds have the 2 highest single year gains as measured in billions of assets. The fundās performance was also described as ālegendaryā in articles, Investors flocked to the fund. It 2007 alone, the Paulsonās managed assets increased from 6B to 28B and 36B a short time later, making it the 3rd largest hedge fund in the world by managed capital. However, the legendary success didnāt continue long with huge losses shortly after 2010, and a subpar long term return overall subsequent decade. As such, Paulsonās managed capital dropped rapidly to a small fraction of past levels, back down to pre-2007 levels of 6B. A few years ago, Paulson made the decision to return the remaining hedge fund capital back to investors and convert to a family office, as many of his peers have done.
Are you considering losses to fees? The fee structure doesnāt appear to be public, but one article mentions 5-10% per year + 20% performance fee on profits, quoting an anonymous source. The fees seem high enough to have a notable impact on overall return for an investor.
Yes, Iām considering fees. According to the FT, Citadelās fund has driven returns of 19.1% per year since inception in 1990. Fees are extraordinarily high from what Iāve heard but the returns more than make up for it.
https://www.ft.com/content/34551975-9554-36d9-a58f-ad40780c4d29
Citadelās flagship multi-strategy Wellington fund has delivered annualised returns (after fees) of 19.1 per cent since its inception in 1990, according to information provided to the Financial Times by an investor in the hedge fund. Citadel declined to provide performance data for this article.
And as to your point about survivorship bias, there absolutely is survivorship bias. But I certainly do not claim that hedgefunds outperform the market as a whole nor will I say for certain that it wasnāt down to luck.
But to outperform over a 30 year period is very, very unlikely unless the fund was adding value in some way.
When looking at these successful funds, it can be difficult to identify what portion of past return is due to luck and what portion of return is likely to continue in the future.
Sure. And it doesnāt help that data for most funds is very secretive which adds to survivorship bias if youāre looking at any sort of index composed of hedgefunds.
If it were easy to allocate capital, fund-of-funds wouldnāt exist.
And itās certainly possible that Citadelās Wellington Fund could blow up. Thereās no guarantee - it was just my opinion that their track record is legendary.
Those that ādabbleā in alternatives, would you speculate and buy a 3X leveraged bull index ETF and hold? If the annualized return is something like 8% per year over 10 years, would it make sense to do this and hope for the best?
I assume youāre familiar with the famous bogleheads threads on it.
I donāt frequent bogglehead forums. That would be completely against the philosophy of boggleheading. Lol.
But, what is the TLDR? In any event, I am going to do this after June 1 and see what happens.
Have you backtested it?
I ran a backtest for you from 1984 to 2023 if you held a leveraged security. Note that I was lazy and I didnāt really bother to change interest rates or simulate actual returns so returns will be slightly/very exaggerated.
But:
Why would you use leveraged securities over futures out of curiosity?
@1dadinNC, I have invested in alternatives (a hedge fund that I helped start and then two Carlyle PE funds). I have done very well in the first two. The third one is newer ā have not yet invested my full commitment ā and have not received any distributions.
I would not invest in a leveraged ETF. Does not cut downside volatility. Iām either looking for an edge (the hedge fund identified a kind of trade that worked well for several years and then faded away over time and we shut the fund as we no longer had an edge) or superior deal flow/skill (what Iām looking for from Carlyle). I would look for returns that are not highly correlated with the S&P 500 but that have lower downside volatility.
TL;DR = Too Long; Didnāt Read
Typically used when someone posts a wall of text that you donāt feel like slogging through.
I think he knows what TLDR means lol. He was asking whatās the summary of those threads.
But I love that you interpreted it in a completely different way - that he was asking what TLDR meant.
Hilarious moment and I mean that genuinely.
Perhaps. But TLDR was a new term for me, even though Iām a retiree who spends a lot of time (ha, too much) online and in these CC threads.
I have no doubt that my ds often thinks, āTL;DRā on many of my texts 
Iām back to debating whether to start drawing my pension. We donāt NEED the money so I think why touch it. If I wait four more years, the monthly amount will max out so Iām inclined to wait, but wait for what? Anyway, hereās my new question ā¦
If I donāt touch it and get hit by a bus tomorrow, dh gets the benefit.
If I start it and elect to not do a joint and survivor option, then when I get hit by a bus the next day he gets nothing.
Of course, I could do a survivor benefit option, but he doesnāt need it so we are leaning against that. He has his own pension and SS and will get my 401k.
The question: Are there some factors Iām missing when making the decision about whether to do a joint and survivor annuity? TIA FYI, this isnāt a huge monthly sum, but itās enough that I donāt want to screw it up!
ETA: We are 60, and our parents lived until late 80s (his) or early 90s (mine).
the biggest factor is health of you and hubby.
My step-mom took joint and survivor when my dad was in poor health. He died way before her and she ended up with a lot less pension to live on.
If it helps, my husband and I both get pensions, and we decided to each keep all of our own/not do survivor benefits.
