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The regular releases of the S&P Index-Vs.-Active report card "SPIVA" show that over longer time periods, there are only 10-20% of mutual funds that can beat the index. The ones that just did, rarely do it again.
Wall Street Pro may look brilliant on the first few sights. But after digging deeper, you may soon conclude doubts regarding their values in aggregate in terms of generating investment returns for Main Street. Actually, individual investors on Main Street have unique but often neglected competitive edges compared to Wa...
Below, I summarize the main reasons why the pros can rarely beat the market average but some individuals should have a high chance of doing so (along with the recommended portfolio strategies).
As is shown, this investor, after 35 years of investing career, would contribute 30% of the total assets that could have been accumulated under the no-fee scenario to fatten the pocket of fund managers.
This is not the worst case yet - think about GPs (i.e., fund managers) of those hedge funds or private equity funds, which normally get paid 2/20 (i.e., 2% annual management fee plus 20% of the investment returns) from their LPs (i.e., high-net-worth individuals or institutional clients).
Here is Terry Smith's (founder of Fundsmith Equity Fund, the consistently top performer among equity funds) favorite example: what if Berkshire Hathaway (BRK.A) (BRK.B) is a hedge fund or private equity fund charging 2% annual fee and 20% performance fee and Warren Buffett is the GP of the fund. As described below, bet...
Leveraging his fantastic capital allocation skills, Warren does have outperformed the market for shareholders but would have no chance at all with such a typical free structure.
Actually, the Oracle of Omaha is the long-time proponent of low-cost index funds in light of most investors. This advice is echoed by his famous 1 million dollar bet that an S&P 500 index fund would outperform a collection of hedge funds after fees over the course of 10 years (see the result below).
Without being charged the fee, individual investors would significantly lift their levels of returns in the long term.
The below table shows that, with an initial investment of $100, a hedge fund manager charging the typical 2/20 fees would need an additional 5% return annual in order to barely approximately match the hypothetical 10% annual return by a passively-managed fund charging 0.1% (although many index funds nowadays even charg...
To beat the Pro, one approach for individual investors is simply to keep their investment costs as low as possible. This could mean trading less actively, never paying performance fees, finding low-cost index funds, and/or avoiding expensive brokerages.
Most institutional investors suffer from the so-called "size disadvantage" - they would have to deploy a sizeable amount of capital of the funds to move the needle, which usually limits their investment choices to large-cap stocks only.
Even within that large-cap stock scope, additional restrictions may apply in terms of ownership percentage. For instance, no matter how Warren Buffett loves banks, Berkshire Hathaway may want to keep their holdings in any US bank under 10% in order to avoid being a bank holding company subjective to more regulations.
All the above would not be an issue for individual investors with much smaller money bases, providing their strategies with the advantages of greater flexibilities as well as a larger pool of investment choices to beat the Pro at the disadvantages.
To beat the Pro, individual investors are suggested to focus more on smaller-cap stocks. You may find that plenty of small- and mid-sized businesses, such as Credit Acceptance (CACC), NIC (EGOV), OTC Markets Group (OTCQX:OTCM), meet the investment criteria (e.g., superior ROIC, high margins, strong cash flow, clean bal...
Unlike individual investors managing money under their ownership, professional fund managers usually deal with clients' money which they do not fully control. This means that panic investors would pull out money at market lows and greedy investors would add in money at market peaks, which would negatively impact fund m...
To beat the Pro, individual investors should avoid emotions influenced by Mr. Market. The market is there to serve investors not to instruct them. They are also advised to set up additional funding for rainy days so as to be able to stay fully invested or even add money during recessions.
Many fund managers tend to chase hot stocks. Remember the internet era in the late '90s when you would look "stupid" without any position in the tech sector. Wall Street professionals face pressures from peers, media, and clients, which often override their independent thinking. This behavioral bias due to fear of miss...
To beat the Pro, individual investors need to stay objective in terms of investment decisions, avoid herd mentality, focus on the long term, and dare to go against the prevailing mindset if necessary. They may also want to get cautious about hot jargons like FAANG, BRIC.
Wall Street professionals are expected to beat the market. But what is the timeframe for them? Unfortunately, it would be year-by-year at most and sometimes quarter-by-quarter or even month-by-month. For example, most fund ranking sites, like Morningstar (MORN), evaluate fund managers' performances on a monthly basis. ...
To beat the Pro, individual investors should leverage their naturally-born competitive advantage of being able to trade short-term volatilities for long-term gains. They may also want to allow performances of their portfolios to significantly deviate from underlying benchmarks, which will be discussed in the next secti...
There are studies indicating that professional money managers in general invest in more stocks than necessary for their funds. Part of the reason here is that fund managers are afraid of deviating their portfolio performances too far away from the major indices to avoid embarrassment. This phenomenon, on the one hand, ...
I can't be involved in 50 or 75 things. That's a Noah's Ark way of investing - you end up with a zoo that way. I like to put meaningful amounts of money in a few things."
I would build a portfolio of 15-20 high-quality businesses and wait patiently to accumulate more of their shares over time.
Stock investing is not for everyone. But if you have the emotional capabilities of staying objective, focusing on the long run, not panicking for the short term, and being patient, why not grab your chance of beating the Wall Street Pro? In case you do not, just follow this simple approach - invest in low-cost index fu...
Disclosure: I am/we are long MOST OF THE STOCKS MENTIONED. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Continental Illinois National Bank and Trust Co. of Chicago, which is shrinking its worldwide banking operations as part of a major reorganization under government supervision, plans to expand its operations locally by opening a full-service facility office in Northbrook.
A spokeswoman for the U.S. comptroller of the currency said Tuesday that the federal agency had approved Continental`s application for a charter in mid-December.
The office will be located at 400 Skokie Blvd. in the northern suburb, adjacent to a brokerage office of Merrill Lynch, Pierce, Fenner & Smith Inc.
The bank said it was aiming to open the facility in mid-April.
Banking sources speculated that Continental, which has been seeking to rebuild its deposit base after a runoff last year, hoped to gain greater access to the above-average-income families living in the north suburban area through the new facility. The area has also seen a rapid build-up of industries in the last 10 yea...
State banking law was amended last year to permit facility offices to make commercial loans as well as deposit-taking. Although such units still can`t legally be called branches, they now can engage in almost every banking activity except trust services. Continental has a separate trust service office in Northbrook.
Illinois banks are permitted to operate three facility offices under state law. One must be located within 1,500 feet of the bank`s home office, the second within two miles and the third anywhere within its home county. Continental already has facility offices at 10 N. LaSalle St. and at Clark and Division Streets.
Its parent company, Continental Illinois Corp., has wholly owned bank subsidiaries in suburban Buffalo Grove and Oakbrook Terrace.
We recently went to Australia and visited places in Queensland and Victoria. Not one restaurant in all the places we visited served straws. I found that I didn’t miss them. Then I learned that even in the United States, a number of cities, including Seattle, have banned straws. Some restaurants, like Starbucks, are mov...
However, the use of straws is widespread. Americans use about 390 million plastic straws a day, according to the market research firm the Freedonia Group. Straws are unnecessary, non-recyclable, non-biodegradable and are bad for the environment. They are in the top 10 list of trash picked up on beaches, according to 1m...
To give up straws is such a simple, yet important thing we can do for the environment. The best we could do is to convince the city to join other enlightened communities to ban straws. In the meantime, local restaurants could stop automatically serving drinks with straws. As individuals we could ask for beverages witho...
It is a small and easy step we can take to help the environment.
The Noah Syndergaard saga will drag out through next week, despite the Mets' best wishes.
ATLANTA — The Noah Syndergaard saga will drag out through next week, despite the Mets' best wishes. The big righthander is going to throw to live hitters early this week in Miami, according to sources, and then if he comes through that without feeling any soreness the Mets hope to pitch him an inning or two in their fi...
Syndergaard, who has been on the disabled list since May 1 with a torn right lat muscle, has made it clear he feels he needs to get back on the mound before the season is over. The Mets are hoping that will happen, but there is concern they are running out of time.
The Mets reversed course on their plans to pitch him on Sunday, to make sure he faces live hitters before appearing in a game. Their concern was that he reported soreness after his last minor league rehab game; they want to make sure he recovers after this time.
Terry Collins was clearly tired of the "drama" surrounding Syndergaard's return.
"It's been set in my mind what we are going to do. If I tell you guys and we change it, then drama hits," the Mets manager said. "And I am done with drama right now. I don't want any more drama. We'll have something in place that we'll be prepared to do it, if we have to change it, we can change it so everybody is nice...
"That's the way I like it, calm."
Syndergaard said Saturday that he felt he could pitch, but understood the Mets being over-cautious with their rash of injuries the last two seasons.
But he said he was getting bored having not pitched in four months.
AJ Ramos said his first time going back to Marlins Park will be a little strange.
"I know the mound pretty well, but I will have to walk to a different dugout and bullpen," said Ramos, who pitched six seasons for the Marlins. "I have to try to keep it as normal as possible, because if you think about it any other way than that, it hurts your performance. So try to keep it as simple as possible."
Ramos has had a weird year overall. He was traded to the Mets in July and has just had an odd pattern of work. After not pitching for seven days, Ramos worked back-to-back days this weekend. He requested to pitch Sunday after Asdrubal Cabrera's homer in the ninth eliminated the chance for a save.
"The whole year has been like that, even when I was with the Marlins. I went six or seven days without throwing as well," Ramos said. "Being able to try and adjust to that is tough. Today they asked me after (Asdrubal Cabrera) hit the home runs if I wanted to pitch and I said 'Yeah.' I didn't feel good yesterday with t...
Jose Reyes' triple in the first inning was his 470th extra-base hit as a Met, surpassing Darryl Strawberry for the second most in franchise history. It was the 34-year old's seventh triple of the season and his 110th as a Met.
Hong Kong’s traditional banks are set to face one of their biggest challenges yet: a new breed of financial technology firms estimated to snare as much as 30 per cent of their revenue.
The Hong Kong Monetary Authority has granted three virtual bank licenses and is processing five more, deputy chief executive Arthur Yuen said in a briefing. Firms that got the permits have partnered with Standard Chartered, BOC Hong Kong Holdings and ZhongAn Online P&C Insurance and they intend to begin operating withi...
The city is playing catch up with regional economies, notably China and India, by allowing FinTech to shake up retail banking. A reliance on cash and strong household savings had yielded high profitability for a clutch of lenders and kept the industry concentrated. That could see the sector vulnerable to disruption as ...
Virtual banks are similar to traditional retail banking services in that they will be able to accept deposits and give out loans. They aren’t expected to set up physical branches. Analysts at Citigroup estimate around 10 per cent of existing banks’ revenue is at risk over the next decade.
Most at risk are HSBC, Standard Chartered, Hang Seng Bank and BOC Hong Kong Holdings, which account for 66 per cent of the retail loan market and 77 per cent of mortgages, according to Goldman Sachs. About $15 billion (Dh55bn), which is 30 per cent of the city’s total banking revenue, is up for grabs, Goldman’s analyst...
The payment space would be the first battle ground between banks and technology firms in the city, the Goldman report said. Hong Kong’s value of cash transactions accounted for about 17 per cent of GDP in 2016, leaving the city behind only Japan among major economies, according to a report published by the Bank for Int...
Virtual banking was one of the FinTech initiatives announced by the HKMA in 2017, which also included a digital payment system that uses mobile numbers and email addresses for payments. The faster payment system had more than 2 million registrations by the end of 2018 and handled transactions worth $13bn since it start...
Digital wallets, intermediaries between a consumer’s phone or tap card and traditional bank account, have also seen a steady increase in use.
Keith Ng, a relationship manager who works in corporate banking and has been using HSBC for more than 10 years for its deposits, foreign exchange and pension services, said he’d love to try to open a virtual bank account as long as they are secure.
Streaming music service Spotify is now available in Costa Rica, along with one of its top competitors Rdio.
On Wednesday, the companies announced their expansion into 20 new countries, including a large chunk of Latin America. Over the past few years, streaming music services have enjoyed a boom in demand in the United States. But due to licensing constraints, the best-established programs had not been available in Costa Ric...
Spotify offers an ad-supported, free model and a premium subscription for desktop streaming. Rdio will give new users “metered access to the web version of Rdio for six months and a 14-day mobile trial,” according to The Verge.
The two companies – Rdio to a lesser extent – are considered two of the biggest players in the increasingly crowded world of streaming music services. Apple and Google each have launched their own streaming music programs though neither have the service available in Costa Rica.
Spotify, with 24 million users and six million paying subscribers, is now available in 55 countries. Rdio is available in 51 countries. However, Rdio recently laid off some of its employees and has never released its number of users. But the service does have one statistic in its favor – the majority of Rdio’s growth i...
In addition to its international expansion, Spotify made two other big statements. The Swedish company will improve the features available for free streaming on mobile and tablet devices (a premium subscription is also available). The music service also is now carrying the catalog of Led Zeppelin. The legendary rock ba...
According to the New York Times, Led Zeppelin representatives had been negotiating a deal since at least January and Spotify beat out Rdio and other smaller programs for the musical rights of one of rock’s most celebrated groups.
The expansion, the new mobile and tablet service, and the Led Zeppelin deal all should help the rapidly-growing company compete with Pandora.
“Today we’re giving people the best free music experience in the history of the smartphone and the tablet,” Daniel Ek, Spotify’s CEO and founder, wrote in a statement.
Rdio’s expansion makes it the second largest music streaming service in terms of global coverage, The Verge wrote.
The two sites moved into many of the same markets in Latin America and Europe, and first-time subscribers can experiment with both services.
Which one should Costa Rican users choose? Reviews seem to favor Rdio for interface and functionality, but prefer Spotify for its convenient free and paid subscription models and its massive catalogue (If you’re a Led Zeppelin fan, obviously you’re going to choose Spotify).
New countries for Rdio: Argentina, Bolivia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Hungary, Israel, Liechtenstein, Luxembourg, Monaco, Nicaragua, Panama, Paraguay, Peru, South Africa, Uruguay, and Venezuela.
Rupert Murdoch's U.K. newspaper chief told David Cameron the night before a crucial political speech in 2009 that they were "professionally in this together," an inquiry revealed on Thursday, embarrassing the man who now rules Britain.
The text message to Cameron, then in opposition, from Rebekah Brooks, then the head of News Corp's British newspaper operation, was read out to the prime minister on live television during a grilling about his ties to Murdoch's media empire.
"I am so rooting for you tomorrow not just as a personal friend but because professionally we're definitely in this together. Speech of your life? Yes he Cam!" Brooks told Cameron in a text message the night before his party conference speech.
Testifying under oath at the Leveson Inquiry into media ethics, Cameron said Brooks had merely meant that they had a common interest because her Sun newspaper had come out in support of his Conservative Party ahead of the 2010 election.
But the message makes excruciating reading for Cameron as "We're all in this together" was the Conservatives' campaign slogan for that election, while "Yes he Cam" was the Sun's headline the day after he made the 2009 conference speech.
The message also shows how close Cameron once was to Brooks, who quit as head of Murdoch's British newspaper arm last year over phone-hacking by reporters and has since been charged with perverting the course of justice for allegedly hiding evidence.
Cameron ordered the Leveson Inquiry last year at a time when he was under pressure to crack down on the Murdoch press because of the revelation that reporters at the News of the World tabloid had hacked into the phone of a murdered schoolgirl.
But if Cameron had hoped the inquiry might take some heat out of the phone-hacking scandal, it has done the opposite, with week after week of revelations casting British politicians as courtiers to the News Corp king.
It has turned into slow-motion disaster for the prime minister, producing evidence that has called his personal judgment into question and deepened a rift with his coalition partners, the Liberal Democrats.
The spectacle of a British leader answering hours of questions under oath at a time when he is grappling with a recession and the fallout from the euro zone crisis is a measure of how treacherous the scandal has become for Britain's elite.
Cameron dismissed as a "conspiracy theory" the accusation that the Conservatives had discreetly championed Rupert Murdoch's interests in return for support from his newspapers.
"Not only was there no covert deal, there was no overt deal, and there wasn't 'nods and winks,'" Cameron said, jabbing his hand forward to emphasize the point.
He rejected the suggestion that while there may have been no explicit deal, there was an unspoken and mutually beneficial agreement between his party and the Murdoch press.
"We do slightly get into sort of witchcraft trials. How do you possibly prove that you're innocent on that basis?" he said.
He was well prepared and gave evidence fluently, clasping his hands and frowning in concentration as he listened to questions from lawyer Robert Jay. This contrasted with his usually relaxed, spontaneous style, reflecting the pressure on Cameron to appear statesmanlike and authoritative.
But his efforts were undermined when Jay read out the 2009 text message from Brooks, which referred to a problem Cameron had at the time with another Murdoch paper and suggested that he and Brooks should discuss the matter "over country supper."
The phrase is embarrassing for Cameron, who used to socialize with Brooks and other powerful and wealthy people connected to Murdoch during weekends at their respective country mansions close to the picturesque town of Chipping Norton.
Revelations about these friendly encounters have been a running theme at Leveson and the circle of friends has been labeled the "Chipping Norton set."
Talk of a discussion "over country supper" also reinforces a public perception of Cameron as a man of wealth and privilege who has little understanding of ordinary voters' lives, an image he has tried very hard to counteract.
Cameron used to sign his frequent text messages to Brooks with an affectionate "LOL," which he thought stood for "lots of love," according to Brooks's own testimony at Leveson.
But the fallout from Leveson has damaged more than Cameron's image. It has also raised questions over his political judgment.
In particular, he has come under attack over his backing for a minister accused of discreetly championing News Corp's bid for full ownership of pay-TV firm BSkyB at a time when the minister was supposed to be an impartial overseer.
Another perceived error of judgment was his decision in 2007 to hire Andy Coulson, who had recently quit as News of the World editor after a reporter was sent to jail for phone-hacking, as his trusted spokesman.
When Cameron became prime minister, Coulson followed him into the heart of Number 10 Downing Street but was forced to resign in 2011 as the hacking scandal resurfaced. Coulson has since been charged with perjury over evidence he gave during a court case related to the phone-hacking affair.
White House press secretary Sarah Sanders tells media to ignore what President Trump thinks he said.
Donald Trump snared headlines across the world by announcing yesterday he would meet with North Korea, breaking with years of American policy that held such a meeting could only happen if North Korea made concessions on its nuclear program first. It turns out Trump’s foreign policy masterstroke did not come as the resu...

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