User can you teach me to invest?

If the only people who get 20 heads follow a certain strategy it's fair to assume they are increasing their odds of getting heads somehow:

>Columbia Business School arranged celebration of Graham–Dodd's jubilee as a contest between Michael Jensen, a University of Rochester professor and a proponent of efficient-market theory, and Buffett, who was known to oppose it. Jensen argued that a simple coin tossing experiment among a large number of investors would generate a few successive winners, and the same happens in real financial markets. Buffett grabbed Jensen's metaphor and started his own speech with the same coin tossing experiment. There was one difference, he noted: somehow, a statistically significant share of the winning minority belongs to the same league. They follow value investing rules set up by Graham and Dodd.

>There was one difference, he noted: somehow, a statistically significant share of the winning minority belongs to the same league. They follow value investing rules set up by Graham and Dodd.

How many people have the intellect, patience, and self-control to adhere to Graham and Dodd?

Certainly most "value hedge fund" managers--the so-called "smartest guys in the room"--don't, because they consistently lose to a simple index strategy.

There may be an elite select few who would be better off following Graham and Dodd's advice. But the other 99.8% of the population would be better off following Malkiel's advice.

>Certainly most "value hedge fund" managers--the so-called "smartest guys in the room"--don't, because they consistently lose to a simple index strategy.
Ehh actually from my reading that's only after they take out their fee; pre-fee they outperform the market. This in fact disagrees with your random-walk sentiment.

>that stock you told me you own went down user.

Followed by a long pause, like I am going to offer to repay their (our) losses. I fucking hate 99.9% of humanity.

>hedge funds lose to index funds
Maybe after a 20% fee on profits and 2% on capital

There are many problems with calculating the returns of hedge funds, most notably survivorship bias.

Markets are not perfectly efficient but they are mostly efficient, and the more "value investors" that enter the market the more difficult it will be for Graham and Dodd disciples to maintain their edge.

As you seem to concede, the average actively-managed dollar returns less than the average passively-managed dollar. Since most normal people (ie, non-accredited investors) don't have the resources or time to perform their own due diligence and equity research, they would be better off with a simple index strategy.

Why make an investment in an actively-managed hedge fund that has a lower net return than a simple index fund?

>As you seem to concede, the average actively-managed dollar returns less than the average passively-managed dollar. Since most normal people (ie, non-accredited investors) don't have the resources or time to perform their own due diligence and equity research, they would be better off with a simple index strategy.
Ah, but that's a far sight from saying it can't be done, as you seem to claim.

As an aside:
>Burton G. Malkiel, an economics professor at Princeton University and writer of A Random Walk Down Wall Street, performed a test where his students were given a hypothetical stock that was initially worth fifty dollars. The closing stock price for each day was determined by a coin flip. If the result was heads, the price would close a half point higher, but if the result was tails, it would close a half point lower. Thus, each time, the price had a fifty-fifty chance of closing higher or lower than the previous day. Cycles or trends were determined from the tests. Malkiel then took the results in a chart and graph form to a chartist, a person who “seeks to predict future movements by seeking to interpret past patterns on the assumption that ‘history tends to repeat itself’”.[5] The chartist told Malkiel that they needed to immediately buy the stock. Since the coin flips were random, the fictitious stock had no overall trend. Malkiel argued that this indicates that the market and stocks could be just as random as flipping a coin.
The fact that the chartist here failed only indicates that TA has failed. A value investor would look at the chart and say "lol where are the financials and yearly reports fgt charts are worthless" In a sense this agrees with their strategy.

I personally wouldn't invest in a hedge fund, but you didnt claim it was a bad investment, you claimed that hedge fund managers dont beat indexes. They do all the time and then take a huge cut and still leave their investors happy. The reason most super rich invest in hedgefunds, not indexes is the downside protection in market crashes. Indexes get killed in crashes and you can't get your money out without taking substantial capital loss. Hedge funds managers put hedges in place to prevent this, hence the name.

>btw stock crashes on their own BTFO efficient market theory. Watch some stocks. They bounce around for no good reason whatsoever, sometimes shedding 10% and gaining 20% the next day. No one actually believes in effecient market theory, it's just a classroom hypothetical, user

Successful Hedge Funds are ranked by AUM. Thus the owner(s) of the fund will do their best to have their managers move money and grow the fund, most often achieved by betting on risky investments (think tech, energy, healthcare). Then they'll look to bail in 4-5 years hoping the economy doesn't crash.

The owners will cash out big and managers will collect fat fees.

Don't post again until you understand the Fama and French three factor model, this applies to pretty much everyone in this thread.

In the simplest terms you can muster, as though you were explaining it to a grown man with a touch of the Down's, what are Stock Appreciation Rights?

>wiki/blog
why not youtube at this point?

i mean, if they are unwilling to read, they'll probably be only happy to know a video exists on youtube that they can watch.

>"Watch this video on investing, Mom."
>"user, who is this smug frogchild sitting in front of the guitars on the webcam?"

>increasing their odds of getting head
I usually wear nice clothes.