Many folks see Boglehead-ism as some sort of science. It’s not bad advice for a disinterested investor in the US, but not exactly optimal advice either.
I’d rather have my AAPL over the last 5 years than VTI+BND.
I’d rather have my AAPL over the last 5 years than VTI+BND.
The most popular index funds (VTI, VGT) only have a 20-year track record, with a paltry 9% and 13% annual return, respectively.
[1] https://www.clearbrookglobal.com/citadel-millennium-d-e-shaw...
Many funds consistently outperform the S&P by 2-3X over 30-40 years. Minimum investment, $5-10M, of course.
Buy and hold is the best option for those under USD $10 million net worth, but you must acknowledge there are semi-closed funds/prop trading firms that consistently beat the market.
But seriously, I'd rather just put money into VTI and VXUS and go back to playing video games, planning a D&D one-shot, programming a bit, or hanging out with friends in my spare time. Let the active traders waste their time poring over 10-Ks and/or charts. I'll be here having fun and taking what the market gives.
The same way you picked your passive index fund: look at 20-30+ years of data.
Unfortunately, VTI, VT, VOO all underperform the top hedge funds, when evaluated over 20 years (risk adjusted return, downside deviation, and absolute return). I’d go further back but VTI was created in 2001 whereas the hedge funds were created in 1980/1990.
Your statement that major index funds all underperform the top hedge funds is tautological, of course the ones that beat the averages are the top funds. What I'm genuinely curious is: how many hedge funds were there in 2001 and how would you identify the top ones?
The other important question is whether a retail investor can join it. I know someone like baobabKoodaa [1] would shout from the rooftops, "You're moving the goalposts, grandparent, waaaaaaaaaaah!" Well, I'm not grandparent, so my goalposts are completely different from theirs.
My goalpost is whether a retail investor like me can get in on those high-flying funds. If not, then in the retail universe, they may as well not exist. Thus, I'm better off investing in VTI/VXUS and using the rest of my spare time coming up with some funny ways to challenge my party in a D&D one-shot.
You can invest actively and intelligently. For example, my 401k offered an emerging markets fund (MGEMX) that isn’t the ideal fund from a cost structure perspective... but it performed really well for a few years. It wasn’t speculation or reckless behavior to have exposure to that sector. Portfolio rebalancing booked my gains when it was rising 30%, and I ended up doing well when 2008 killed that sector.
That doesn’t mean buy and hold doesn’t make sense either. If I was lucky and held on to an early fun money Bitcoin buy I’d be on an island right now!
Kenneth French (the "French" in the Fama-French asset pricing model) provides market data going back to 1972 [1] and can be used to reconstruct index fund performance.
Citadel doesn't have individual clients, and if you're not a billionaire I don't see how you'd gain access to their hedge fund.
[1] https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data...