I think that this is known basically by all poeple here. Thatās very much true, but I would like to explrore more than the classic SP500 and so on.
The only warranty here is basically the spread fee that they gain if the funds overperform the benchmark.
On the other hand, I have a question for all the people in the forum:
do you all agree that the only way to go is with ETFs? Is there no one (at least trying) here questioning the status quo?
I personally do not believe that there is only one answer to such a complex problem Donāt you?
If you want higher returns than market returns, you need to accept that this comes with higher risk too.
I mean outperforming the market is easy. Buy the ETF with 20% margin, so that you are invested 120% in stocks. If you avoid a 1929-like crash you are garanteed to outperform the market by ~20%. But you get lower risk-adjusted returns.
There are definitely people on the forum going with either stock picking or more active funds, check existing threads.
Personally Iām happy with a more conservative approach, I wouldnāt be confident I can find something that consistently outperforms so Iām happy to follow the benchmark already.
I think that is more correct to say āMost active investors do not generate excess return over the long termā. Some have e.g. Warren Buffett. The problem is identifying them.
Or renaissance: Stock picking vs ETF
btw the thread link seems to cover the exact same arguments as here 
*in advance.
Picking the prebious winner is a terrible terrible strategy. Hopefully OP doesnāt go through with it.
Every day, and I think itās the right thing to do. But hold on a minute before you go shovelling your hard-earned cash into the pockets of a CS hotshot.
I think it is really important to ask a question first: what are we trying to achieve? If your aim is above market returns so you can retire a very rich ItalianEngineer (rather than just a rich one), then broad market ETFs are not for you. You are going to have to take more risk (and therefore increase your risk of failure). Whether CS is the answer is (very) debatable.
What if I said I could sell you a fund which would be guaranteed first quartile performance every single year after fees compared with all the other funds in the market? Sounds good, right? Well, that description applies to an index ETF.
Also, the comparison of the 130/30 fund to the index is misleading because the risk is higher (and thereās a good chance they left out dividends on the index too). They should really compare to an index of long/short funds, I suppose.
One more thing. Iāve been in this investing game for a long time. Iād be a lot richer if Iād been invested in ETFs from day one.
Quick correction: I have looked more at the SPI benchmark. It looks like I was being unfair and it does include dividends reinvested. I must be becoming cynicalā¦
This is exactly what @Cortana and others were trying to say.
If at CS they were really that good at managing active funds all of their funds will be consistently outperforming the market. But you said it yourself:
If I start 40 completely random funds today and look back in 17 years you might find that one of my random funds was able to consistently beat the market. This would be just luck, it doesnāt make me a brilliant fund manager, and itās no good reason to put more money in the lucky fund.
Of course it might not be the case with your fund, but youāre betting against the odds.
To me, broad, low fees ETF are the default, to invest in any other way, you need a specific reason and to be able to tell why.
Iām investing in individual swiss stocks because:
I trust my government to bail me out more than I trust a foreign one to bail out foreign investors and I am willing to take concentration risk in exchange for this perceived safety.
Swiss indexes are already highly concentrated. Replicating the SMI, for example, can easily be roughly done on a retail level. As an accumulator, I can ārebalanceā with the input of new money, making paying additional fees an unnecessary part of my investing process. For investing in the swiss market, any TER is unnecessary fees in my view.
Individual stocks allow me to invest in the companies of which I understand the business model the best.
I can register my shares. Voting rights are an inherent part of shares and I canāt fathom myself considering Iām buying āpart of a businessā if all Iām buying are its assets and no decision power, no matter how small. I want to own businesses so individual stocks are, in my opinion and at my level of investable wealth, the only way to go.
Iāll diversify geographically following the same principles once my wealth reaches a certain level (500ā000.-) and I feel no longer fine with the concentration risk Iām taking.
As you can see, not all of these reasons are financial and few of them are about increasing my returns. Iād invest part of my money in a very broad low fees ETF if I felt I knew better the risks I perceive with them (risk of seizure by foreign governements, risk of mismanagement by the fund managers leaving me with the total loss of my capital). Iām more about minimizing my losses than maximizing my gains so Iād not invest in a high fees product no matter how well the fund manager has done in the past.
What? Care to share any evidence for this? Itās a well established fact that investing globally according to market cap weights results in the most efficient stock portfolio.
Of course you could add bonds and other asset classes. But this is a FIRE forum. You need the highest possible stock allocation to reach your goals in a āshortā time.
TLDR;
is this not a more modest versino of this approach:
No if they were a risk parity fund, they would say so.
Ouch. Steady on!
You raise an interesting point on asset allocation. But I must admit the complexity bamboozles me a little. VT is over 50% North America, for example, but most of those companies are international so have exposure to the world economy. FTSE 100 companies, if I recall correctly, get 70% of their revenues from outside the UK (but you have other diversification issues there, as the index is heavy on oil, financial and miners and low on tech). Itās a puzzle alright.
I think the important thing is to diversify, and Iād defend the people who do that by having VT as the only equity fund as I think it gives great diversification, simply. But being 100% equity can be a roller coaster ride, so is not for the faint-hearted, and the relative stability of some bonds can help ease us through troubled times. (When in doubt, I put on a Youtube video of Jack Bogle. He explains it all like a kindly uncle.) Buy the haystack, friends!
What assets do you have in mind there? Private equity? (Always looking for ideasā¦)
Interesting assets, TeaCup, thank you. Looks like you have a focus on yields, which is understandable. It seems to me that many people on here have more of a focus on growth (as many are relative youngsters and are quite early on in the accumulation phase of FIRE) which explains the emphasis on shares (and geared real estate, but to a lesser extent).
I must admit, everytime I look at things like high-yield bonds and senior loan ETFs, the yields never look exciting enough for the potential downside.
My position is that itās all down to individual objectives. I know someone whose objective is capital preservation. Doesnāt care about income or growth, and just wants to sleep well at night knowing his stash is safe. So his choices will obviously be different from the young worker aiming to build wealth for early retirement.
Anyhow, looks like youāre as negative as most people here on this 130/30 thing (he says, dragging the conversation back to the subject). So there you have it, ItalianEngineer. Good luck all.
THanks a lot, very interesting
You have a point. Iām also quite worried ot putting all eggs in one basket. Thatās why th willingness of exploring some different
FAANG, is very scaring. We complain of having around 60% in the big three in the Swiss market, but the FAANG+Tesla represent somehow even more, taking into account the variability they could have 