I definitely do not believe that most analysts have the time to do Burry/Lynch/Buffett-like analysis of a company. Just look at the companies they recommend (especially sell-side of course, but I'm not too impressed with the buy-side either (not sure if we have the same distinction in Sweden though)) I don't have any contact with them whatsoever, so I don't know how much research they do, but from what I read in the paper, I am very rarely impressed.
One of the thing that truly set Buffett apart was how much he read and (subsequently) knew – so much more than others that it just blew them away. Most people don't read that much. It's like sports – even NBA players can be left in the dust by a Dennis Rodman who started playing seriously in his 20's, was told he "couldn't defend", but then just worked so much harder than everyone else that he became one of the best defenders to ever play the game. Same holds true for most other athletes – and investors.
Time or research wasn't my main point, though. Also, I think that what I meant was that they aren't given enough time for their investments to pay off from customers/bosses who want more immediate returns. (E.g., people tend to leave the truly exceptional funds, due to temporary drawdowns, etc. etc. etc.)
My main point, then, is that they may have more research and tools, but are unable to act upon their (presumed) insights b/c of above (and more). They are incentivised to thing short-term, and not in value investor terms. Personality, independence, and steadfastness/"determinedness"/long term-approach is at least as important as whatever advantages analysts may have, I think.
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You adhere to EMT then? ;-) No, j.k., I agree: in reality, most people should, but just bc it's better than giving your money to somebody else (another human).
But if you truly understand the fundamental and psychological reasons as to why VI works, and will continue to work over long periods of time, I don't see why one should put their money in indexes rather than do the improvements and modifications oneself.
I mean, just the fact that the indexes overweight the popular (i.e. overpriced) stocks and underweights the unpopular (which is of course, according to (almost) all of value theory, the opposite of what one should do). Also, just sell when the market is high (like now) and buy when the market is low (i.e. under p/e 15). Buy Graham-stocks, buy Buffett-companies, or any other disciple; there are so many different ways of doing it, so many strategies. I just cannot believe that the average should do better than that, even with only those basic adjustments made. As long as one doesn't get too carried along, and get too attached to the 'game aspect' of it all, it's really shouldn't be more complicated than that. I can't see how.
I get that all this must sound naïve, but I really don't see the logical, rational reasons as to why an index should be "unbeatable". Sure, for the general public who know absolutely nothing about stocks; but remember, your average professional isn't too knowledgable either, in my experience.
If you'd like, please explain to me the reasons why even the astute investor wouldn't be able – I would be thankful. (B/c I have never heard a good in-depth argument, but then again, have never discussed it with someone on the VI thread either...)
I mean, it just that – an average – not Buffett. |
