BGR, First, why compare returns against the market? That is MPT's straw man, not mine. My financial needs are not those of the market. Second, what "the market?" The S&P 500? The Russell 2000? The Value Line? The Mexican Bolsa? The CRB? The Hang Seng? What makes any one of these "the market?"
I have outperformed most indices most of the time by taking much LESS risk than the market simply because I have skills and techniques most market players do not possess. This isn't talent; it was hard work learning them. I do not make more money on a 90/10 portfolio because I am taking more risk. I am taking less risk. I do better research, which is important, but the main reason I outperform is that I have both a superior money management system and use techniques that are out of the mainstream. This is true in my Income portfolio and in my 90/10 portfolio. In my cap app portfolio, the techniques are pretty standard, though I do use a broader array of assets than most managers. I have outperformed over time with the cap app, but I have had periods of underperfomance, also, as a straight long portfolio does follow the concepts that an MPT professor would claim. I definitely take higher risks at bottoms with this portfolio.
Why should I adjust a beta? That is a historical, static measure. It has nothing to do with the future. I am trying to make money today, not yesterday. It is also silly as Hell. Was there ever a money manager anywhere who did not know that Presstek was riskier than Exxon? Gimme a break. Nonsensical academic flapdoodle.
Again, the majority of money managers cannot outperform, by definition. An index fund can also not outperform the index, by definition, and they have all underperformed over time. But, since the majority of portfolio managers have no idea how to connect the dots in research, have no idea of how to use the techniques that are available to lower risk and increase performance, and play in niches that restrict making profits, I don't want to consider those dummies my peers. Yes, they are overpaid. Which means nothing about nothing. Can a superior investor produce superior returns at lower risk? No question about it. Of course, most of them are not working for mutual fund cos. for the same reason Lennox Lewis doesn't fight with one hand tied behind his back.
MB |
