02-05-2017, 11:28 PM
(This post was last modified: 02-05-2017, 11:53 PM by crimsonghost747.)
(02-05-2017, 09:08 AM)Roadmap2Retire Wrote: @crimsonghost, not sure your comparison is apt. I am referring to index fund investing in general (the benchmark itself) and not referring to active managers/professional investors working at banks/hedge funds/other investment firms. The benchmark index itself does not care whether a month, quarter or year's returns are positive or negative. It is what it is.
Yes if we are talking strictly about index funds then you are correct. I was referring to your comment about there being millions who do this for a living and have ample knowledge and resources... the very large majority of them invest for different goals than we do.
Further discussion related to beating the benchmark: Profit correlates with risk. So if you build a safer portfolio than the benchmark index you are comparing to, then you'll most likely also make less profits over the long term. In fact I'd say that the easiest way to beat the index is to invest in a single company... hundreds of companies that beat the index on a permanent basis. Two of my top 3 companies would have beaten the index on almost any stretch of time between 2007 and now. (10 years. Way before I even started investing) And the one that misses is a REIT which I bought for the high yield and monthly payments.
My top company (RTN) would have generated more than TWICE the profits of the S&P500 in the past 10, 5 or 2 years while the profit for the past 1 year would have been lower. (those 4 time scales are what yahoo gives me straight off the bat.) But it's all about the risk / reward ratio. Overall my portfolio is dragging behind the S&P500. I don't compare to it though but I did take a look just for the purpose of this post. So would I be currently better off if I had put it in index funds? Yes. Would I be as safe as I am now? I don't think so.
What if I put it all in RTN? I'd be rolling in money like Scrooge McDuck but that would have happened with way more risk than I was ready to take.
Like I said I don't even compare to any index, simply because my goals are more geared towards limiting downside and increasing dividend income.
And those goals probably mean that I won't reach the profit of S&P500 over the long term because I have chosen a less risky method. I guess what I'm saying is that it's more about finding a good risk/reward ratio for myself rather than comparing my results with a set benchmark.