I think Peter Lynchs logic has a flaw here. Most people are not nearly as suited to do as well as he. It is like Michael Jordan saying "It is a good idea to try to become a professional basketball player, afterall it worked for me" There is a reason why Buffet does not tell his wife to pick stocks after his death, instead she will get a s&p500 etf and not even berkshire shares.
You are right, but unfortunately the fact most people are not able to become active investors does not change fact that index investing carries more risk than it used to.
I think Lynch is telling people to think about the risk and reward of an investment, after 40 years of doing great, index funds might not deliver as expected!
Sven: I will only do 3/4 videos a month Audience: Nooo Also Sven: It's Christmas, let's give the masses what the want... more videos :) Audience: Legend
The only hiccup I see with Sven and Peter's thesis: FMAGX's holdings match the SP500. When I pull the comp of the mutual fund right now, it's top ten holdings are AAPL, MSFT, AMZN, FB, GOOGL, GOOG, NVDA, UNH, V, HD. The fund is holding the same expensive market giants like most ETFs. I would be interested to see a composition change in the fund for any future predications.
Warren also said that 99% of the population should not be investing active, because they are not suited fot it. Sven do you think he is wrong on that one? If not, than how likely is it that all the people here watching belong to that 1%? I'd rather go with Aswath Damodaran take on this, who despite being a great analyst himself said: "I choose to invest active not because I think I am better than the market, but because I like doing it. I am not certain I will beat the market, maybe I will, but assuming you definitely will do it is hybris" (Can't recall the exact quote, paraphrashing slightly)
We, especially males just inherently refuse accept the fact 90-99% of us are not built to pick stocks. Most of us use our life savings to proof we are the top smart ones, and most of us will fail statistically. That's why buffett recommend index funds.
@@jsauerfinancial8257 well I mean if stock market crash, and needs a decade or more to recover, portfolio's Investor will be negative wherever invest and indeferrently if is stock, ETF, or bonds
@@jsauerfinancial8257 yes, but this kind of choices are much much easier than stock-picking choices. we all ought to subjectly and honestly assess our own abilities and available time and decide if we are suitable to do stock picking.
The biggest flaw in my investing is not the index it is myself. I'm using the passive indexing as a hedge against myself as a core to pick businesses around. I'm no Peter Lynch nor should I pretend to be able to achieve his success or that of Warren Buffett in picking individuals businesses, no one should think that really that's just ego talking. I'm trying to learn those skills of course but I think the etf strategy is a good option as a safe guard against my personal flaws and mistakes in picking businesses. (I don't exclusively do the sp500 etf btw). So i just try to do as Sven says, my goal is to find one to three ideas that will set me up right. In the meantime I dont think it's a bad idea to have some money stored in etfs automatically while I find the right opportunity.
Over decades, there's no denying the power of index funds. However it is going to follow market returns. So some people are willing to take more risks for slightly better return which adds up over the years
I think it's very disingenuous to say the risk is 7x higher for the S&P than before. Things haven't been stagnant, there has been economic growth and inflation throughout those 12 years. While valuations may have gone a bit over the top, the companies of the index have clearly increased in intrinsic value since 2009.
The problem is that you’re ignoring the historical data of various markets of more than 100 years . At 15 PE like in 2009, the expected real return over 10 years is 8-9% per year, while at 40 PE (where we are now), the expected yield is actually negative. The higher that stocks go and the higher the ratio becomes, the more negative your return will be in the end.
@@metaloph1l That may give reason to exercise caution, but Sven wasn't using PE to make his argument. He was simply comparing the price of the index to its previous price and stating it's 7x more risky.
@@metaloph1l "The problem is that you’re ignoring the historical data of various markets of more than 100 years ." - past performance does not guarantee it will always be that way
The key to staying a disciplined value investor in my opinion is after buying a good valued company, ignore the price for a long time. The only time a price should influence your behaviour is if the price dips alot and you buy more if you still like the business. Ignoring price volatility has helped me tune out the balogna and focus on my long term goals
You had said you were going to make less videos and ensure they're high quality. You're spoiling us! Instead, you're making high quality videos and putting them out constantly. Love the detailed information you provide
The video is only looking at the S&P 500 (US), which I agree is priced for low returns going forward. There are other countries & regions that are priced for better returns. But the market can also stay irrational longer than I can remain solvent - I’m learning that lesson with BABA right now.
While I agree that expected returns for major indexes are lower than in the past (we cannot know what the real returns will be ahead of time course) , I cannot agree that the risk/reward relationship for active investing is a better alternative - assuming of course by active you mean stock picking (all methods of investing are active to some degree). Picking stocks leaves you under diversified and thus carrying a lot of idiosyncratic risk. It is more risky. And it’s a risk with no expected return. We see this reflected in the extreme positive skewness of individual stock returns. If someone is looking for higher expected returns perhaps they may wish to look at small cap value index trackers. This of course also exposes you to more risk , but it is systematic risks- the kind an investor can expect to earn a return for being exposed to.
It all depends how you define risk. If risk is not meeting your financial goals, then an index fund like S&P500 with less than 2% dividend yield and 2-3% annual earning growth is unlikely to deliver for most people.
Not sure I understand what you mean. In first para you are skeptical that we can reasonably guess the level of returns for index fund but then second para you assume "no expected return" and high risk for picking individual companies. Why no return for picking individual stocks?
@@TheLazyGamer42 Sorry I’ll try to clarify. I don’t mean to say there is no expected return for individual stocks. There is of course. What I mean is that there is no expected return for taking on idiosyncratic risk - the expected returns for individual stocks come from priced/compensated risks such as market , size , value and a few others. The idiosyncratic risk comes extra , and you’re not compensated for it. That’s why people diversify , to reduce this type of risk while remaining exposed to the types of risk that are reflected in asset prices. By picking stocks rather than being broadly diversified you’ve added extra risk for no added benefit. This leads to a wider dispersion of returns that will be skewed against you. Your expected return will be less reliable. That is why I don’t think stock picking is the best option for achieving anyones financial goals. Perhaps it can achieve other goals , such as if someone gains utility in some other form than expected returns. Think people who enjoy low odds of a high payout , or people who simply enjoy reading about and researching companies. If people aren’t satisfied with only achieving the market premium there are more rational and evidence based methods to increase them. This can be as simple as investing with leverage for example , or they expose their portfolio to other types of systematic / compensated risks such as value and size while remaining diversified. All the methods will carry additional risk , but at least they’ll be the right type of risk.
@@739jep Despite having read it several times, I have never fully understood why, from a theoretical point of view, idiosyncratic risk is not compensated. If I have invest in a single company, take this risk, and the stock rises more than the market, haven't I been compensated to take such risk?
@@giovannitardini5248 that’s a good question and the full answer is somewhat complicated and probably best represented mathematically but I’ll try my best to keep it simple. Please forgive me if I babble too much 😂 I’ve struggled with it in the past as well. The simplest answer would probably just be ‘because the model works fine without the assumption idiosyncratic risk is compensated’. That is , when we analyse the returns of a cross section of stocks we find that systematic risks explain close to all of the price variability. Those risks are reflected in prices. But as to ‘why’ we see this in the data, the most common theory is to do with diversification. You don’t need to take idiosyncratic risk, you could easily invest in another security so why should you be compensated for taking on unnecessary risk. There’s lots of sites you can Google that give good analogies as to what’s happening here , might help explain it better. The theory may not please you and that’s fine. The theory however is only there to try to explain what we see in the data. The theory could be false , and it wouldn’t change reality. We would just need another theory to explain the data. I should probably explain a few terms. Expected returns are simply the discount rate of expected future cash flows , it is what you expect to earn by buying the stock. Actual returns are made up of both expected and unexpected returns. The example you give where a stock out performs the market could be an example where the stock earned quite high unexpected returns. That is great if you’re holding the stock. But if you look at the market as a whole these unexpected returns for individual stocks are quite skewed - that is most of these unexpected returns are poor. The is probably an example of uncompensated idiosyncratic risk manifesting itself in reality. That said , is it possible to have a big score on an indivisible stock? Absolutely, which is why I guess people do it, but based on the data alone you could never ‘expect’ to have a big pay out. That’s why people say individual stocks have a ‘lottery’ nature. Diversifying on the other hand can reduce or eliminate idiosyncratic risk, without reducing expecting return. It does however reduce your chance at a huge payout (which was unlikely in any event). Personalities on RUclips , in the news or on the cover of how to books will tell you it’s possible to identify what these stocks are. But this seems pretty well debunked in the data as well, they rely on anecdotal evidence to put forward that claim. That’s a different topic entirely though. The other issue with your example is that it’s assuming that outperforming the market is a compensation for idiosyncratic risk. Even in single factor models there’s a perfectly rational systematic risk based explanation for outperforming the market - the stock has a beta higher than 1. That would mean that the excess return was in fact due to the non idiosyncratic risk. In addition , there are many other systematic risks other than market beta. There is value , size , investment , profitability, momentum to name some main ones. People often get this wrong too. They often point to buffet outperforming the market while having a lower beta , but completely ignore his excess exposure to other risk variables (let alone leverage). Buffet is one of the greatest investors of all time , precisely because he identified risk factors before academia did and knew how to use it. We can invest like that too, but we can do it through better diversification thus having less exposure to idiosyncratic risk than buffet. This improves the reliability of our expected returns. Sorry if that all sounded like waffle, it’s a bit hard to explain in the RUclips comment section 😂
"if you want mediocre you wouldn't be watching this channel" Perfect! Sooner or later we will be in another stretch where we see little to no gains over a decade. I've fretted about the 2000 on decade happening again. I have just recently adjusted my portfolio where about 1/2 is dividend stock yielding 6% average. This will cover 100% of my present salary. Unless things get so bad dividends are suspended, I'm good. 1.2% yield wouldn't buy the average retiree five cans of tunafish a week! The 7X performance is astounding. As you stated terribly weighted at the top. So astounding most don't realize it. There will be a day where the averages pay. The value of value and new technology, ideas and better processes will outperform by wide margins. Don't shake the bottle skim the cream from the top...
Sven- I always enjoy watching your videos and appreciate your knowledge on these topics. I think many of those who are very focused on indexes are forgetting about the price they are paying. One of my favorite investors to listen to is Howard Marks, and can very much relate to and understand his perspective on markets in general. That being said, I believe we are heading more into a value cycle and less on growth which supports your point of view. The plus for index investors (if they don’t want to touch their money) is that they can accumulate during this long period in an index and not miss the next growth cycle. In the mean time, I agree with you. I think stock picking is going to outperform these coming years, and I think ‘pockets’ of value will be created via the economic cycle (and in other unknown ways) until the next growth cycle.
What you can do to get rid of capitalization weight risk is pretty simple Just invest in an equal weighted s&p fund so each company makes up 0,2 % of the index. Also because of the quaterly rebalancing of those funds they take profits on companies that went up and buy into companies that are cheaper
Good Video! Sven your method is superior. For you audience buying value stocks is much better than buying index funds. The problem is most investors do not have the ability to sit through the lean times. Index funds have their place in investing-mostly to keep the sharks at the mutual fund companies away from ones door. If you are a young investor who has the discipline to dollar cost average for twenty years waiting for the earnings to catch up with the price, he or she will do better than the average investor who buys high and sells low. Keep up the good work!!!
Index Funds have its place in investment. The question is how and when you buy them: dollar-cost-average? Buy consistently? Buy more at down market? One thing I pretty sure is that buying them now is bad idea. Because it would almost like buying FAAMG stocks right now at their peak overvalued prices. the risk is too high and reward will be too low.
Index funds are overvalued compared to their historic valuations because the long term valuation trend is almost always positive. And index funds are overvalued compared to the currently undervalued future winners. The future will tell if we´ll be among the very few investors who manage to cherrypick the winners and if the relative risk of our current investments was actually lower then buying the complete index. Interesting times ahead.
Agree with all your points. Interesting to compare to Dalio/Bridgewater that seems to be very heavy into index funds. Btw - Dalio's new book is very interesting (so far). Fascinating macro/historical point of view.
I think you would be the best one to ask this. How about analyzing the top 3 car makers in europe and compare to tesla, nio and other overhyped stocks. For example Renault (french) has the most sold EV in europe. Lov your videos, you do an amazing job.
Actually Tesla overthrew Renault as EV top seller. For a car that is >2x the price of the Zoe, it’s no small achievement. No hyping out Tesla here, just laying some facts.
I think index funds in conjunction with covered calls (monthly divdend) is a very safe bet - so if we believe that for ex. SP500 goes from bottom-left to top-right - forvever ! - then you might loose short term but long term it's a safer bet then to bet on potentials 10 bagger. And adding up with you monthly savings - makes totally sense.
Swen, you should revisit some of you great calls of the past. Like Rio Tinto as an example. $15 increase in share price. $20 in dividends paid out in the last few years. I bought more when it dropped to $60 because of low iron ore prices. Artificially low because the Chinese had to weigh steel making verse clean air for the Olympics. It's still on sale with a 2022 expected dividend of $5 USD. 7.7% forward yield with reasonable payout ratio.
It is context. There is a big difference between a small retail investor who wants to take advantage of the tax benefits in a pension for example and Peter who is looking from a perspective of a portfolio worth millions plus
@sven - could you help me understand how to value L&G (LGEN) given recent events with UK gilt prices, illiquidity and the BoE stepping in. It pays 8% dividend, share price is materially down and prior to recent events, i viewed them as a solid company. Does purchasing L&G meet the criteria for value investing please?
:-) Comment of the day :-) The learning journey to try and reach exceptional performance is not for all. Seeing most of the comments above - people must just make their choices and be at peace. Sven is teaching us how to fish. If people are not interested in fishing for marlins. They can stay in the mediocre lane :-) We need more of Thug Life Sven :-)
Interesting video as always, thank you. I'm currently an index investor but I watch your channel to try to learn how to pick my own stocks. What I would like to know, is how much time you think someone needs each week to be an active investor? Sadly the reality for most of us is we don't have allot of free time after working our full time jobs, so it tends to be funds or nothing for a large part of the investing community.
that is a good question, but my message is not that you need to be the best investor, my message is to know what is the price of something and the value it delivers!
As a biomedical scientist I thought I knew the biotech sector and tried investing in Biotech for several years but quickly learnt that Biotech is incredibly volatile and holds little relation to the performance/data of their pipelines 😂. Sticking to Index funds till I learn more, with some green energy plays recently and a small portion DCAing Bitcoin and Etherum as they have done me well, have bullish momentum and are hard coded to be worth more over time woth their supply creation mechanisms. But still super volatile so I just have to ignore that side of my portfolio and set my sell orders 🤣. Thanks for the video Sven!
Hi Sven, I normally love your content and am a subscriber to your research platform. But repeatedly stressing that s&p500 is 7x higher and implying the risk is 7x is disingenuous. I do agree with your premise, but you're not paying any attention to the earnings growth the companies within the index have achieved over this period, and arguably how the change in mix of the index constituents toward high margin, high growth tech mega-caps changes the outlook for future earnings growth. I personally think the indexes are overvalued, and people thinking that big tech trees can grow to the moon may end up disappointed. But to not mention the overall earnings growth reflected in the price of the index loses some credibility here, just to be totally honest
that is such simplistic thinking showing you actually don't understand what you are talking about - Swiss and UK companies have costs on global prices, thus not that easy to find correlations.....
If we don’t invest, we lose 6%+ to inflation, if we do invest we get stretched valuations. Also, stock picking is more risky for most people and even good stocks are drawn down by ETFs when there is a big reset…😶🌫️😶🌫️🥴🥴
Great analysis! Generally most other investors tend to recommend ETFs to avoid risks while they consider companies lile Apple or Tesla as very expensive, when in reality both are expensive and full of risk now.
You might be right but the problem is that for who does not have a financial education background or the time to get it, it is very hard to rely on stock advice and then have the confidence that is the right plan even when things go south. Or even correct your plan when needed. This is what I learn myself, with no background in finance it is very hard to navigate between all the noise and never question if we are doing the right thing because we will likely not know it before 10 years. This uncertainty increases the temptation to change the plan in the attempt to avoid the volatility eventually making catastrophic moves. So yes, if you know what you are doing you could beat the market but if you don't, just invest in diversified index funds and stay the course. At least if you are wrong, 90% of the world will be wrong as well and you can blame the economy....
i think my investment in BTI will do better. ;) i have a div yeald on cost on 8.7% and BTI and others like them tend to do ok during recesions historically. the payout ratio is just below 60% :)
I used to own BTI and sold around breakeven after a year. I don’t like it because I wish they would use the money they are paying out as dividends to grow/innovate the business. Their market share is slowly getting squeezed YoY as less people smoke. The best thing they could probably do is sell the whole company and payout shareholders or make radicals changes.
The "smart beta" index strategies (which the Van Eck firm is big on) are basically a form of value-lite investing. For example, in Australia, equal weight strategies have done better than cap-weighted strategies, since they give greater sector diversity and more exposure to both growth and value companies. In the US, large cap value index funds are currently giving superior returns to large cap growth funds, which did very well in the 2010s. So saying there are other forms of index investing that might do better than cap weighted index investing doesn't really undermine the value investing argument against traditional index funds.
If Warren buffet says you need to invest in vanguards s&p 500 that is more than enough for me!! As for buying individual stocks most companies are way overpriced so I’ll just carry on averaging down until I see deals again next year possibly…I’m holding for 20 plus years the only question I have is will the s&p be higher in 20 years than it is today…
what should older people do though? My mother will retire in 10 years and she wants to invest for her pension, but anything other than index funds would be way much more volatile than the liquidity required for such a short term investment requires.
Hi Svin! Can you do an analysis on PRX or the US equivalent to it PROSY (I may be wrong on this). They follow sort of the same method as spawners that Mohnish Pabrai talks about.
This is a very America-centric view of Passiv investment. It is never a good idea to invest in a single country like the US with the s&p 500. More diversivid indices like MSCI EM have a way lower price to book and price to earnings compared to the S&P 500
@@ibrahimciftci9599 That would be a very heavy US weight compairt to the US GPD personly I use 35% MSCI EM 20% MSCI EMU 25% MSCI World 20% MSCI World Small Caps, that reduces the effect of big tech and adjusts for the smaller market capatiliziaion in europ and the emerging markets compairt to the GDP.
I invest in index funds but also purchase well run publicly traded companies with strong balance sheets, cash flow, and consistent net income. Keep buying index funds but also look out for the type of companies mentioned above.
Hey Sven did you make analysis of Melco ? I live in cyprus and the casino is huge here, lots of opportunities for employment and tourism, can I have your thoughts about this stock ?
the only ETF I am still interested in are china. but there are different kind of shares. do you pay attention to the fact if a stock is a-,b-,h-share? seems like mainland, local a-shares have the biggest potential right now
Genuine question. With the evolution of semiconductor and then the internet revolution, things are reacting and recovering much faster simply due to fast communication, transport, production. Wars between big nations are becoming unlikely while plenty of economic policy have been implemented to prevent crashes like in the 40s. Should we still look at pre-1990 years. Sure human greed and fear still remains the same but things can grow and decay and recover so much faster now. What use to be a 10 year recover might now only take 3 years.
So many comments disagree. It is a tough pill to swallow esp. because all of the points are the same 1yr ago, 2 yrs ago, even 3yrs ago, and yet S&P500 index has done VERY well over each of those time periods. This is why investing is so challenging.
Lets get real. Who of the normal retail investors really know what they are buying when they buy individual stocks? Sven knows, ok but what about everybody else. 99% of u dont because u dont put in the time 🤷♂️ Even if you read Svens research. You are just following unless u build your own opinion. Be real. No hate here.. Love Sven forever ✌️great man
Last week I did my own valuation of the S&P500 based on every company's EPS and sadly I can only see about a 3% return. And for this entire week, I've been thinking about whether to sell my position in the index or not. It's so weird how the opportunity cost for not indexing seem so big. Everyone is telling you to index and how you're missing out if you don't. But from a value investing perspective, indexing today just doesn't make sense. And today, this chart (7:33) just helped me make up my mind.
50% of the index is made up of only 20 companies, mostly all growing much more than 3% and only a handful are so overpriced that their expected return will be less than 8%. In addition, in 20 years, the SP500 will be dominated with amazing businesses that are probably only just starting in somebody’s garage. We can’t predict the future, but the ingredients of the future are in the SP500 now or will be over the next 20 years. It’s the best place to have your money.
Yeah did the same at the the index level, with comparable growth, reversion to the mean, over 15 years, I calculated about 7% per year unless some high inflation or deflation (normal 2-3%). I looked in fee individual positions like apple, railroads, etc. Same expected returns give or take with moderate asumptions for the economy. If it does better than 10% I will be shooked lmfao. What they don’t tell anyone is that half the return of the previous decade is merely multiple expansion.
Disagree…… Picking up that one great stock is very very time consuming. Does not work for all investors. Investors have just invested in VTSAX and it has provided decent returns for retirement over long periods. Also, Index funds balance their portfolio on regular basis to provide the desired returns. Many investors do not have time or understanding to rebalance their portfolio. Like Jack Boggle said,”Why look for needle in haystack, buy the whole haystack”
@@Value-Investing Another very important aspect to factor in is, Exit Strategy for stocks. This is complicated too. Thanks for your reply. Will look in-depth into Index funds. Times have changed a lot.
Thoughts on an equally weighted index funds? In Australia there is QUS which is an equally weighted S&P 500 index, which I've been thinking about investing in
To summarize how I understand this. Index funds are made of the bigest companies and they are overpriced and it seems like all market including properties is overvalued and it is going to burst as a buble. So what to do now with cash that is loosing value faster than ever? How comw that gold is not skyrocketing in this environmen?
Sven, what do you think about Joel Greenblatt’s Gotham SPY etf? It re-weights the stocks in the SPY based on how cheap they are and buys more of the cheap stocks. Would this be something interesting for you? The ticket is GSPY
Geez Sven, it's painful to watch you get hammered in the comments here. I thought you made a lot of brilliant points in this video, and it reflects some things I've thought of myself. I'm a beginner and don't have much at stake yet, so it's really comforting to hear that I'm not just some crazy noobie who can afford to run his mouth. Psychologically I think there's some sort of resistance to the notion that not only will passive indexes not guarantee huge returns going forward (over 10%), but they may even return very mediocre returns for a long stretch (flat plus the horrible dividend right now). Suddenly responsibility is thrust back into it - you can't just be a mindless monkey anymore. At least if you're being honest about the risks involved. I applaud you for having the courage to stick to your guns even when it's not popular, and I hope you know that I (and many of us) truly appreciate the message you're bringing with your content. Thank you!
I like to view my investment approach as having index funds as the “backbone” of my savings (approx 75%). I set them up and leave them long term. Frankly, I don’t really care what the value of those assets does over the next few years as I’ll be holding them for at least 50 years (hopefully). On top of that core I have a few select direct share holdings in which I agree it’s most important to invest in a few great businesses. I keep much more of an eye on those than my index investments but still don’t mind short term fluctuations much… if at all.
Make sure that you do not invest everything into one index try and diversify over several. Mutual funds now have a bad reputation but if you research them you will find good funds.
@@bighands69 oh 100%. I try to take as global a view as possible. Some people see index investing as just investing in Vanguards S&P 500 fund and leaving it at that. Not the way.
@@Value-Investing comunque l'intervento con Pietro Michelangeli è stato interessante e come scritto anche a lui, ho trovato le tue opinioni, valide e con fondamentali. Sarai uno stimolo per imparare di più l'inglese.
Thanks for another insightful video, Sven. I appreciate your content a great deal. I have two questions: First, what reliable free resources do you use to identify index earnings yields? Second, do you consider contrarian index investing a worthwhile strategy? By that I mean choosing unloved indexes with good earning/dividends yield. Similar to Sir John Templeton’s strategy with mutual funds. Without having checked the yields, it seems like Turkey and Japan may have some cheap indexes currently. Cheers.
The fact remains that the vast majority of stock-pickers won't beat the market over the long term, no matter how much they 'study'. Stock-picking remains *by far* riskier than investing in a cap-weighted global index fund.
Not only that , active managers that did manage to beat the index are no more likely to continue beating it than an active manager who didn’t. This suggests that the few who do manage to beat it do so due to luck.
Indexes returning 0% over the next 10 or 20 years is acceptable for people that are DCA’ing their pay checks every month. Of course I would rather purchase SPY shares at a fair price or discount, but the majority of us won’t be plowing large sums of cash in all at once. So in the long term, it matters very little the price I paid yesterday. 20 years flat (while collecting dividends) to amass the largest collection of SPY and then a massive bull run? Sign me the heck up!
But but but Graham Stefan... Stopped investing in index funds, dumped most of my ETFs. Especially dumped ARK for a profit. ETFs don't let you pick your positions in stocks and charge you an expense percentage for it. Best "index fund" is perhaps the SPGP GARP fund or just buy Blackrock stock at a low and own a company that owns overpriced Index Funds/ETFs without paying expense ratio.
Nobody ever mentions i-bonds in the US. They hedge inflation decently (way better than alternatives now). They can be sold after 1 year, so easy place to store some side cash.
I like the comment about 40hours work vs 1hour money management. I think PL compared that in general we spend more time reviewing a microwave, than we do investments. I think about owning SPY being for my kids/grand kids, as it's unlikely that the market will be lower in 30years than it is now and my hunch is it will be ahead of inflation, even slightly. Plus it won't have the fees of a managed fund. Is this thinking unreasonable?
I think Peter Lynchs logic has a flaw here. Most people are not nearly as suited to do as well as he. It is like Michael Jordan saying "It is a good idea to try to become a professional basketball player, afterall it worked for me"
There is a reason why Buffet does not tell his wife to pick stocks after his death, instead she will get a s&p500 etf and not even berkshire shares.
You are right, but unfortunately the fact most people are not able to become active investors does not change fact that index investing carries more risk than it used to.
I think Lynch is telling people to think about the risk and reward of an investment, after 40 years of doing great, index funds might not deliver as expected!
What happened to: "a few videos at the end of the month"?😆Not complaining, I love your content!
Its like a christmas calendar! Happy holidays fellow investors!
Psst! Don't remind him, just enjoy ;-)
Well as subrscriper I really hope to see Sven more on platform and less on RUclips.
just for december :-) But I can't sit back, I do more when I do more :-)
Ah, you better unsubscribe from the platform../. I don't like your attitude for the pennies you are paying!
Sven: I will only do 3/4 videos a month
Audience: Nooo
Also Sven: It's Christmas, let's give the masses what the want... more videos :)
Audience: Legend
hahahaha, just for DEC Merry Christmas!
The only hiccup I see with Sven and Peter's thesis: FMAGX's holdings match the SP500.
When I pull the comp of the mutual fund right now, it's top ten holdings are AAPL, MSFT, AMZN, FB, GOOGL, GOOG, NVDA, UNH, V, HD. The fund is holding the same expensive market giants like most ETFs. I would be interested to see a composition change in the fund for any future predications.
they are a big fund, so yes!
Buying vym. S&p overvalued
@@ecosby100 I invest in single stocks and Etf, so if i find opportunities in Etf, why don't get it, on buying them.
@@dinosgura what u buying baby
Warren also said that 99% of the population should not be investing active, because they are not suited fot it. Sven do you think he is wrong on that one? If not, than how likely is it that all the people here watching belong to that 1%?
I'd rather go with Aswath Damodaran take on this, who despite being a great analyst himself said: "I choose to invest active not because I think I am better than the market, but because I like doing it. I am not certain I will beat the market, maybe I will, but assuming you definitely will do it is hybris" (Can't recall the exact quote, paraphrashing slightly)
@@jsauerfinancial8257 investing in any Japanase stock on 1989 you needed as well decade to recover ;-)
It’s not just about beating the index, it’s about reducing the risk of not meeting your financial goals.
We, especially males just inherently refuse accept the fact 90-99% of us are not built to pick stocks. Most of us use our life savings to proof we are the top smart ones, and most of us will fail statistically. That's why buffett recommend index funds.
@@jsauerfinancial8257 well I mean if stock market crash, and needs a decade or more to recover, portfolio's Investor will be negative wherever invest and indeferrently if is stock, ETF, or bonds
@@jsauerfinancial8257 yes, but this kind of choices are much much easier than stock-picking choices. we all ought to subjectly and honestly assess our own abilities and available time and decide if we are suitable to do stock picking.
The biggest flaw in my investing is not the index it is myself. I'm using the passive indexing as a hedge against myself as a core to pick businesses around. I'm no Peter Lynch nor should I pretend to be able to achieve his success or that of Warren Buffett in picking individuals businesses, no one should think that really that's just ego talking. I'm trying to learn those skills of course but I think the etf strategy is a good option as a safe guard against my personal flaws and mistakes in picking businesses. (I don't exclusively do the sp500 etf btw). So i just try to do as Sven says, my goal is to find one to three ideas that will set me up right. In the meantime I dont think it's a bad idea to have some money stored in etfs automatically while I find the right opportunity.
thanks for sharing!
I mainly pick, but I also add to a few core mutual funds. Especially to easily dispose of dividends. I think some is smart.
I enjoy the increase of videos. It is hard to find level headed and non-hype opinions on RUclips.
Sven is my market therapist
Thanks, I am trying to find a good balance
If 2022 is going to be bad for index investors, then mathematically it's going to be even worse for most active investors.
true. but it depends of course which stocks you have. can you avoid the stocks that most have?
For most people investing in overpriced assets that do not deliver a good yield, that’s true.
Wouldn't be smart for active Investors to buy main companies from index funds
depends on what kind of investor are you!
@@Value-Investing So the answer is to invest in good business with possibly good dividends? Back to our roots? So like Coca-Cola etc. ?
If being mediocre means following mediocre people like John Bogle (the founder of Vanguard) then I am ok with it 🤣
Over decades, there's no denying the power of index funds. However it is going to follow market returns. So some people are willing to take more risks for slightly better return which adds up over the years
Bogle started his fund just when index fund began their golden era - so that is also to keep in mind!
@@Value-Investing I like you Sven but you also have a business interest to undermine index funds 😜
I think it's very disingenuous to say the risk is 7x higher for the S&P than before. Things haven't been stagnant, there has been economic growth and inflation throughout those 12 years. While valuations may have gone a bit over the top, the companies of the index have clearly increased in intrinsic value since 2009.
Exactly, on shiller pe basis, the market is some 2.5x more expensive, which surely brings more risk, but it is far from 7x.
The problem is that you’re ignoring the historical data of various markets of more than 100 years . At 15 PE like in 2009, the expected real return over 10 years is 8-9% per year, while at 40 PE (where we are now), the expected yield is actually negative. The higher that stocks go and the higher the ratio becomes, the more negative your return will be in the end.
@@metaloph1l That may give reason to exercise caution, but Sven wasn't using PE to make his argument. He was simply comparing the price of the index to its previous price and stating it's 7x more risky.
Agree with @Letter on this one, nobody's saying the index is not expensive, it's just not the case that it is 7x as expensive as 12 years ago.
@@metaloph1l "The problem is that you’re ignoring the historical data of various markets of more than 100 years ." - past performance does not guarantee it will always be that way
The key to staying a disciplined value investor in my opinion is after buying a good valued company, ignore the price for a long time. The only time a price should influence your behaviour is if the price dips alot and you buy more if you still like the business. Ignoring price volatility has helped me tune out the balogna and focus on my long term goals
you got it!
Nah, if a company gets overvalued for me then I also sell.
@@potatofrogs5999 that too! That often takes a bit of time tho, hence the patience.
@@potatofrogs5999 What do you mean "overvalued for me"? Either it is overvalued or it's not.
@@mmabagain My valuation can differ from your valuation. If everyones valuation was the same then the market would not be such a rollercoaster.
You had said you were going to make less videos and ensure they're high quality. You're spoiling us! Instead, you're making high quality videos and putting them out constantly. Love the detailed information you provide
hahaha, thanks!
The video is only looking at the S&P 500 (US), which I agree is priced for low returns going forward. There are other countries & regions that are priced for better returns. But the market can also stay irrational longer than I can remain solvent - I’m learning that lesson with BABA right now.
absolutely!
While I agree that expected returns for major indexes are lower than in the past (we cannot know what the real returns will be ahead of time course) , I cannot agree that the risk/reward relationship for active investing is a better alternative - assuming of course by active you mean stock picking (all methods of investing are active to some degree).
Picking stocks leaves you under diversified and thus carrying a lot of idiosyncratic risk. It is more risky. And it’s a risk with no expected return. We see this reflected in the extreme positive skewness of individual stock returns.
If someone is looking for higher expected returns perhaps they may wish to look at small cap value index trackers. This of course also exposes you to more risk , but it is systematic risks- the kind an investor can expect to earn a return for being exposed to.
It all depends how you define risk. If risk is not meeting your financial goals, then an index fund like S&P500 with less than 2% dividend yield and 2-3% annual earning growth is unlikely to deliver for most people.
Not sure I understand what you mean. In first para you are skeptical that we can reasonably guess the level of returns for index fund but then second para you assume "no expected return" and high risk for picking individual companies. Why no return for picking individual stocks?
@@TheLazyGamer42 Sorry I’ll try to clarify. I don’t mean to say there is no expected return for individual stocks. There is of course. What I mean is that there is no expected return for taking on idiosyncratic risk - the expected returns for individual stocks come from priced/compensated risks such as market , size , value and a few others. The idiosyncratic risk comes extra , and you’re not compensated for it. That’s why people diversify , to reduce this type of risk while remaining exposed to the types of risk that are reflected in asset prices.
By picking stocks rather than being broadly diversified you’ve added extra risk for no added benefit. This leads to a wider dispersion of returns that will be skewed against you. Your expected return will be less reliable.
That is why I don’t think stock picking is the best option for achieving anyones financial goals. Perhaps it can achieve other goals , such as if someone gains utility in some other form than expected returns. Think people who enjoy low odds of a high payout , or people who simply enjoy reading about and researching companies.
If people aren’t satisfied with only achieving the market premium there are more rational and evidence based methods to increase them. This can be as simple as investing with leverage for example , or they expose their portfolio to other types of systematic / compensated risks such as value and size while remaining diversified. All the methods will carry additional risk , but at least they’ll be the right type of risk.
@@739jep Despite having read it several times, I have never fully understood why, from a theoretical point of view, idiosyncratic risk is not compensated. If I have invest in a single company, take this risk, and the stock rises more than the market, haven't I been compensated to take such risk?
@@giovannitardini5248 that’s a good question and the full answer is somewhat complicated and probably best represented mathematically but I’ll try my best to keep it simple. Please forgive me if I babble too much 😂 I’ve struggled with it in the past as well.
The simplest answer would probably just be ‘because the model works fine without the assumption idiosyncratic risk is compensated’. That is , when we analyse the returns of a cross section of stocks we find that systematic risks explain close to all of the price variability. Those risks are reflected in prices.
But as to ‘why’ we see this in the data, the most common theory is to do with diversification. You don’t need to take idiosyncratic risk, you could easily invest in another security so why should you be compensated for taking on unnecessary risk. There’s lots of sites you can Google that give good analogies as to what’s happening here , might help explain it better.
The theory may not please you and that’s fine. The theory however is only there to try to explain what we see in the data. The theory could be false , and it wouldn’t change reality. We would just need another theory to explain the data.
I should probably explain a few terms. Expected returns are simply the discount rate of expected future cash flows , it is what you expect to earn by buying the stock. Actual returns are made up of both expected and unexpected returns. The example you give where a stock out performs the market could be an example where the stock earned quite high unexpected returns. That is great if you’re holding the stock. But if you look at the market as a whole these unexpected returns for individual stocks are quite skewed - that is most of these unexpected returns are poor. The is probably an example of uncompensated idiosyncratic risk manifesting itself in reality. That said , is it possible to have a big score on an indivisible stock? Absolutely, which is why I guess people do it, but based on the data alone you could never ‘expect’ to have a big pay out. That’s why people say individual stocks have a ‘lottery’ nature.
Diversifying on the other hand can reduce or eliminate idiosyncratic risk, without reducing expecting return. It does however reduce your chance at a huge payout (which was unlikely in any event). Personalities on RUclips , in the news or on the cover of how to books will tell you it’s possible to identify what these stocks are. But this seems pretty well debunked in the data as well, they rely on anecdotal evidence to put forward that claim. That’s a different topic entirely though.
The other issue with your example is that it’s assuming that outperforming the market is a compensation for idiosyncratic risk. Even in single factor models there’s a perfectly rational systematic risk based explanation for outperforming the market - the stock has a beta higher than 1. That would mean that the excess return was in fact due to the non idiosyncratic risk.
In addition , there are many other systematic risks other than market beta. There is value , size , investment , profitability, momentum to name some main ones. People often get this wrong too. They often point to buffet outperforming the market while having a lower beta , but completely ignore his excess exposure to other risk variables (let alone leverage). Buffet is one of the greatest investors of all time , precisely because he identified risk factors before academia did and knew how to use it. We can invest like that too, but we can do it through better diversification thus having less exposure to idiosyncratic risk than buffet. This improves the reliability of our expected returns.
Sorry if that all sounded like waffle, it’s a bit hard to explain in the RUclips comment section 😂
"if you want mediocre you wouldn't be watching this channel" Perfect! Sooner or later we will be in another stretch where we see little to no gains over a decade. I've fretted about the 2000 on decade happening again. I have just recently adjusted my portfolio where about 1/2 is dividend stock yielding 6% average. This will cover 100% of my present salary. Unless things get so bad dividends are suspended, I'm good. 1.2% yield wouldn't buy the average retiree five cans of tunafish a week!
The 7X performance is astounding. As you stated terribly weighted at the top. So astounding most don't realize it. There will be a day where the averages pay. The value of value and new technology, ideas and better processes will outperform by wide margins. Don't shake the bottle skim the cream from the top...
yep!
Sven- I always enjoy watching your videos and appreciate your knowledge on these topics. I think many of those who are very focused on indexes are forgetting about the price they are paying. One of my favorite investors to listen to is Howard Marks, and can very much relate to and understand his perspective on markets in general. That being said, I believe we are heading more into a value cycle and less on growth which supports your point of view. The plus for index investors (if they don’t want to touch their money) is that they can accumulate during this long period in an index and not miss the next growth cycle.
In the mean time, I agree with you. I think stock picking is going to outperform these coming years, and I think ‘pockets’ of value will be created via the economic cycle (and in other unknown ways) until the next growth cycle.
What you can do to get rid of capitalization weight risk is pretty simple
Just invest in an equal weighted s&p fund so each company makes up 0,2 % of the index.
Also because of the quaterly rebalancing of those funds they take profits on companies that went up and buy into companies that are cheaper
thanks for sharing!
Okay, so u sell well performing stocks and buy others with poor returns instead?
@@robertgemesi277 it's in line with statistics "return to mean". I find it counterintuitive and don't believe that principle fits here.
I do both, I have a passive indexed portfolio, and a value portfolio.
2023 was definitely a year to focus on stocks. new to your channel, thank you.
If you want mediocre then you wouldn't watch this channel. Golden words. Thank God for people that are seriously looking out for the next person
Good Video! Sven your method is superior. For you audience buying value stocks is much better than buying index funds. The problem is most investors do not have the ability to sit through the lean times.
Index funds have their place in investing-mostly to keep the sharks at the mutual fund companies away from ones door. If you are a young investor who has the discipline to dollar cost average for twenty years waiting for the earnings to catch up with the price, he or she will do better than the average investor who buys high and sells low.
Keep up the good work!!!
that is an advantage for us, let's keep it that way!
Sven, what do you think about selling options for income. Do you see this as a good way to build wealth? Thanks
Index Funds have its place in investment. The question is how and when you buy them: dollar-cost-average? Buy consistently? Buy more at down market? One thing I pretty sure is that buying them now is bad idea. Because it would almost like buying FAAMG stocks right now at their peak overvalued prices. the risk is too high and reward will be too low.
Good point!!!
Index funds are overvalued compared to their historic valuations because the long term valuation trend is almost always positive. And index funds are overvalued compared to the currently undervalued future winners. The future will tell if we´ll be among the very few investors who manage to cherrypick the winners and if the relative risk of our current investments was actually lower then buying the complete index. Interesting times ahead.
Agree with all your points. Interesting to compare to Dalio/Bridgewater that seems to be very heavy into index funds. Btw - Dalio's new book is very interesting (so far). Fascinating macro/historical point of view.
we cannot know what Dalio owns as he doesn't have to report most of it.
This is a great channel for investors. Been looking for a channel like yours for a long time.
Welcome aboard!
I think you would be the best one to ask this. How about analyzing the top 3 car makers in europe and compare to tesla, nio and other overhyped stocks. For example Renault (french) has the most sold EV in europe. Lov your videos, you do an amazing job.
Actually Tesla overthrew Renault as EV top seller. For a car that is >2x the price of the Zoe, it’s no small achievement.
No hyping out Tesla here, just laying some facts.
@@Kilaueaorph4n fair enough, might have been 2020 sales
when the time is best to analyze those - give me a recession first!
@@Value-Investing okay then 😂 we shall wait
I think index funds in conjunction with covered calls (monthly divdend) is a very safe bet - so if we believe that for ex. SP500 goes from bottom-left to top-right - forvever ! - then you might loose short term but long term it's a safer bet then to bet on potentials 10 bagger. And adding up with you monthly savings - makes totally sense.
wouldn't that forced you to sell back in 2011, thus you would have had it very bad
Thank you Sven, always happy to get to watch one of your videos
Thanks
Swen, you should revisit some of you great calls of the past. Like Rio Tinto as an example. $15 increase in share price. $20 in dividends paid out in the last few years. I bought more when it dropped to $60 because of low iron ore prices. Artificially low because the Chinese had to weigh steel making verse clean air for the Olympics. It's still on sale with a 2022 expected dividend of $5 USD. 7.7% forward yield with reasonable payout ratio.
I did recently, don't worry, but I can't own everything!
It is context. There is a big difference between a small retail investor who wants to take advantage of the tax benefits in a pension for example and Peter who is looking from a perspective of a portfolio worth millions plus
he started with 3,500, so his perspective is the same
@sven - could you help me understand how to value L&G (LGEN) given recent events with UK gilt prices, illiquidity and the BoE stepping in. It pays 8% dividend, share price is materially down and prior to recent events, i viewed them as a solid company. Does purchasing L&G meet the criteria for value investing please?
Another great video. Much appreciated.
Small remark
1.26 is read as one point two six
thanks!
I love how I'm not even American and the fed still saved my ass, God bless America! America is such a huge market that it affects the global market.
hahahaha
According to Peter Lynch you should never invest into Alibaba because we have no clue what the Chinese government is going to do with Alibaba.
thanks for sharing, for that matter we have no clue what the EU or US govermennts will do to themselves
Can you please do a video on the valuation of BlackRock, Vanguard etc.?
thanks for suggesting!
"If you want mediocre in life..... then you wouldn't be watching this channel"
Thug life Sven 10/10
:D
:-)))
:-) Comment of the day :-) The learning journey to try and reach exceptional performance is not for all. Seeing most of the comments above - people must just make their choices and be at peace. Sven is teaching us how to fish. If people are not interested in fishing for marlins. They can stay in the mediocre lane :-) We need more of Thug Life Sven :-)
Interesting video as always, thank you. I'm currently an index investor but I watch your channel to try to learn how to pick my own stocks. What I would like to know, is how much time you think someone needs each week to be an active investor? Sadly the reality for most of us is we don't have allot of free time after working our full time jobs, so it tends to be funds or nothing for a large part of the investing community.
that is a good question, but my message is not that you need to be the best investor, my message is to know what is the price of something and the value it delivers!
None of you will beat regularly contributing to a simple SP500 or total market index fund over the long term. That is a fact.
I did beat that by far, but about the future - only time will tell!
I agree, when I look the historical returns from the so called great investment gurus from dataroma, they fail to beat S & P 500 index.
@@Value-Investing so am Im beating it for 5 years in a row. But guaranteed not ove the next 30 years
Literally every video gets a 👍🏼 from me! Love Peter Lynch!
I am unable to invest in anything but index funds for my 403b/401k.
thanks! As for that, build another pillar :-)
As a biomedical scientist I thought I knew the biotech sector and tried investing in Biotech for several years but quickly learnt that Biotech is incredibly volatile and holds little relation to the performance/data of their pipelines 😂.
Sticking to Index funds till I learn more, with some green energy plays recently and a small portion DCAing Bitcoin and Etherum as they have done me well, have bullish momentum and are hard coded to be worth more over time woth their supply creation mechanisms. But still super volatile so I just have to ignore that side of my portfolio and set my sell orders 🤣.
Thanks for the video Sven!
thanks for sharing!
Hi Sven, I normally love your content and am a subscriber to your research platform. But repeatedly stressing that s&p500 is 7x higher and implying the risk is 7x is disingenuous.
I do agree with your premise, but you're not paying any attention to the earnings growth the companies within the index have achieved over this period, and arguably how the change in mix of the index constituents toward high margin, high growth tech mega-caps changes the outlook for future earnings growth.
I personally think the indexes are overvalued, and people thinking that big tech trees can grow to the moon may end up disappointed. But to not mention the overall earnings growth reflected in the price of the index loses some credibility here, just to be totally honest
I would argue the growth will revert to the mesn there too!
Is it a thaught to put some amount of money in Swiss / UK companies, to bypass the inflation risk of the Euro/dollar?
that is such simplistic thinking showing you actually don't understand what you are talking about - Swiss and UK companies have costs on global prices, thus not that easy to find correlations.....
If we don’t invest, we lose 6%+ to inflation, if we do invest we get stretched valuations. Also, stock picking is more risky for most people and even good stocks are drawn down by ETFs when there is a big reset…😶🌫️😶🌫️🥴🥴
:-)
Great analysis! Generally most other investors tend to recommend ETFs to avoid risks while they consider companies lile Apple or Tesla as very expensive, when in reality both are expensive and full of risk now.
because they don't know what risk is!
You might be right but the problem is that for who does not have a financial education background or the time to get it, it is very hard to rely on stock advice and then have the confidence that is the right plan even when things go south. Or even correct your plan when needed. This is what I learn myself, with no background in finance it is very hard to navigate between all the noise and never question if we are doing the right thing because we will likely not know it before 10 years. This uncertainty increases the temptation to change the plan in the attempt to avoid the volatility eventually making catastrophic moves. So yes, if you know what you are doing you could beat the market but if you don't, just invest in diversified index funds and stay the course. At least if you are wrong, 90% of the world will be wrong as well and you can blame the economy....
if you don't know anything, this could be a good strategy, not great, but good: ruclips.net/video/IVgz3Vq9V1k/видео.html
Looking forward to the video on Xiaomi. I would also love to see a video on Sea Limited ticker SE! Thank you!
Thanks for suggesting!!
i think my investment in BTI will do better. ;) i have a div yeald on cost on 8.7% and BTI and others like them tend to do ok during recesions historically. the payout ratio is just below 60% :)
I used to own BTI and sold around breakeven after a year. I don’t like it because I wish they would use the money they are paying out as dividends to grow/innovate the business. Their market share is slowly getting squeezed YoY as less people smoke. The best thing they could probably do is sell the whole company and payout shareholders or make radicals changes.
@@valueinvestingmindset8127 dont agree. They are growing. Maby just not as fast as you like😊
thanks for sharing, interesting perspective!
The "smart beta" index strategies (which the Van Eck firm is big on) are basically a form of value-lite investing. For example, in Australia, equal weight strategies have done better than cap-weighted strategies, since they give greater sector diversity and more exposure to both growth and value companies. In the US, large cap value index funds are currently giving superior returns to large cap growth funds, which did very well in the 2010s.
So saying there are other forms of index investing that might do better than cap weighted index investing doesn't really undermine the value investing argument against traditional index funds.
Ik dacht dat je minder content ging maken;). Bedankt voor je video’s. Ik leer er veel van.
Ik weet dat Sven in Amsterdam heeft gewerkt maar kan hij ook nederlands? haha
ik ben nog an het zoeken wat het beste ritme for mij is :-)
Thank you for always giving me a lot to think about!
haha :-) sorry!
@@Value-Investing LOL. You challenge my assumptions and what I've learned so far. The truth isn't always easy to hear, but I appreciate it. =)
If Warren buffet says you need to invest in vanguards s&p 500 that is more than enough for me!! As for buying individual stocks most companies are way overpriced so I’ll just carry on averaging down until I see deals again next year possibly…I’m holding for 20 plus years the only question I have is will the s&p be higher in 20 years than it is today…
that is good for you then!
what should older people do though? My mother will retire in 10 years and she wants to invest for her pension, but anything other than index funds would be way much more volatile than the liquidity required for such a short term investment requires.
index funds can be volatile too - buy an appartment and rent it out, that is a start, no volatility there
Hi Svin! Can you do an analysis on PRX or the US equivalent to it PROSY (I may be wrong on this). They follow sort of the same method as spawners that Mohnish Pabrai talks about.
I have it covered on my research platform, so I can't discuss it publicly!
This came out pretty much at the top of the market.
Was Lynch a value or growth investor? I've heard people say both.
both:-) focused on earnings...
This is a very America-centric view of Passiv investment. It is never a good idea to invest in a single country like the US with the s&p 500. More diversivid indices like MSCI EM have a way lower price to book and price to earnings compared to the S&P 500
@@ibrahimciftci9599 That would be a very heavy US weight compairt to the US GPD personly I use 35% MSCI EM 20% MSCI EMU 25% MSCI World 20% MSCI World Small Caps, that reduces the effect of big tech and adjusts for the smaller market capatiliziaion in europ and the emerging markets compairt to the GDP.
yes, but then again there is so much more behind an index than pe and pb
I invest in index funds but also purchase well run publicly traded companies with strong balance sheets, cash flow, and consistent net income.
Keep buying index funds but also look out for the type of companies mentioned above.
thanks for sharing!
Hey Sven did you make analysis of Melco ? I live in cyprus and the casino is huge here, lots of opportunities for employment and tourism, can I have your thoughts about this stock ?
thanks for reminding me, I will have to check again.
Gran bel video druze Sven , finalmente hai messo un giovane.... grazie per il servizio
:-)))
Hi Sven. Could you analyze BAYER? Is it a dead trap? Or the cheapest company on the DAX??
Would love to hear your input
Thanks!!
ruclips.net/video/LmNuPFhgLno/видео.html
Only P/E matters when judging index funds, not the price itself. The same regarding single stocks.
thanks for sharing
the only ETF I am still interested in are china. but there are different kind of shares. do you pay attention to the fact if a stock is a-,b-,h-share? seems like mainland, local a-shares have the biggest potential right now
I focus on the business first, then the shares!
This video was especially interesting, thank you very much!
thanks!
Please consider making a stock analysis of Samsung Electronics Co.
thanks for suggesting!
The Eurostoxx 600 and Emerging Markets are great for 2022.
who knows
Genuine question. With the evolution of semiconductor and then the internet revolution, things are reacting and recovering much faster simply due to fast communication, transport, production. Wars between big nations are becoming unlikely while plenty of economic policy have been implemented to prevent crashes like in the 40s. Should we still look at pre-1990 years. Sure human greed and fear still remains the same but things can grow and decay and recover so much faster now. What use to be a 10 year recover might now only take 3 years.
not in my opinion, things were moving at the same speed then too when it comes to markets etc..
So many comments disagree. It is a tough pill to swallow esp. because all of the points are the same 1yr ago, 2 yrs ago, even 3yrs ago, and yet S&P500 index has done VERY well over each of those time periods. This is why investing is so challenging.
absolutely, that is why I like it :-)) It is hard to be a contrarian but that is life!
Lets get real. Who of the normal retail investors really know what they are buying when they buy individual stocks? Sven knows, ok but what about everybody else. 99% of u dont because u dont put in the time 🤷♂️ Even if you read Svens research. You are just following unless u build your own opinion.
Be real.
No hate here.. Love Sven forever ✌️great man
thanks Mike!
Yep.
Yep!
Last week I did my own valuation of the S&P500 based on every company's EPS and sadly I can only see about a 3% return. And for this entire week, I've been thinking about whether to sell my position in the index or not. It's so weird how the opportunity cost for not indexing seem so big. Everyone is telling you to index and how you're missing out if you don't. But from a value investing perspective, indexing today just doesn't make sense.
And today, this chart (7:33) just helped me make up my mind.
🙄
50% of the index is made up of only 20 companies, mostly all growing much more than 3% and only a handful are so overpriced that their expected return will be less than 8%.
In addition, in 20 years, the SP500 will be dominated with amazing businesses that are probably only just starting in somebody’s garage.
We can’t predict the future, but the ingredients of the future are in the SP500 now or will be over the next 20 years. It’s the best place to have your money.
yes, the thing is that nobody knows the future, but flows keep things going higher, so not being in is costly....
Yeah did the same at the the index level, with comparable growth, reversion to the mean, over 15 years, I calculated about 7% per year unless some high inflation or deflation (normal 2-3%). I looked in fee individual positions like apple, railroads, etc. Same expected returns give or take with moderate asumptions for the economy. If it does better than 10% I will be shooked lmfao. What they don’t tell anyone is that half the return of the previous decade is merely multiple expansion.
Dear Sven, given the Magellan’s fund stellar performance over the years, why is the performance of FMAGX so much different?
I really don't know how that works! Haven't looked into what it represents.
Disagree……
Picking up that one great stock is very very time consuming. Does not work for all investors. Investors have just invested in VTSAX and it has provided decent returns for retirement over long periods.
Also, Index funds balance their portfolio on regular basis to provide the desired returns. Many investors do not have time or understanding to rebalance their portfolio.
Like Jack Boggle said,”Why look for needle in haystack, buy the whole haystack”
agree, but then just know the potential outcomes, but I added to factors / maybe better to spend money elsewhere
@@Value-Investing
Another very important aspect to factor in is, Exit Strategy for stocks. This is complicated too.
Thanks for your reply. Will look in-depth into Index funds. Times have changed a lot.
You can buy an active managed fund.
Thank you for this video and sharing your perspective. I learned.
happy to hear that!
Thoughts on an equally weighted index funds?
In Australia there is QUS which is an equally weighted S&P 500 index, which I've been thinking about investing in
still index funds :-(
Sven, if you look at Lynch's portfolio though in his working days his portfolio was a giant index fund. He nurtured the flowers and cut the weeds.
yes, he had 1500 stocks, but one can simplify with 10 stocks too!
To summarize how I understand this. Index funds are made of the bigest companies and they are overpriced and it seems like all market including properties is overvalued and it is going to burst as a buble. So what to do now with cash that is loosing value faster than ever? How comw that gold is not skyrocketing in this environmen?
there is too much noise when it comes to gold!
Fantastic video with very good logic.
Emerging market etf is a good alternative
I don't know!
It's like christmas every day with all these videos! Thank you, great value ;)
thanks!
Sven, what do you think about Joel Greenblatt’s Gotham SPY etf? It re-weights the stocks in the SPY based on how cheap they are and buys more of the cheap stocks. Would this be something interesting for you? The ticket is GSPY
I don't know, still a relative approach!
Hey Sven, great video as always. Would you say BRK is a better options than the SPY given the fact that over the past 10 years SPY outperformed BRK?
When I say better I mean better from a value standpoint today in December 2021
all depends on the price, but BRK has less risk for a better return I think!
What do you think about shorting GME?
I simply don't think about that!
But FMAGX since 2007 to nowadays move from 100 to 15. Am I missing something? Thank you
probably, I don't know the history of the price there, maybe a split
Not the channel for people who want mediocre. Love it! 😎
:-)
Geez Sven, it's painful to watch you get hammered in the comments here. I thought you made a lot of brilliant points in this video, and it reflects some things I've thought of myself. I'm a beginner and don't have much at stake yet, so it's really comforting to hear that I'm not just some crazy noobie who can afford to run his mouth.
Psychologically I think there's some sort of resistance to the notion that not only will passive indexes not guarantee huge returns going forward (over 10%), but they may even return very mediocre returns for a long stretch (flat plus the horrible dividend right now). Suddenly responsibility is thrust back into it - you can't just be a mindless monkey anymore. At least if you're being honest about the risks involved.
I applaud you for having the courage to stick to your guns even when it's not popular, and I hope you know that I (and many of us) truly appreciate the message you're bringing with your content. Thank you!
thanks for this nice comment!
@@Value-Investing Thanks to you, Mr. Sven!
Is there another index that you like ? Maybe china ?
I don't like indexes!
I like to view my investment approach as having index funds as the “backbone” of my savings (approx 75%). I set them up and leave them long term. Frankly, I don’t really care what the value of those assets does over the next few years as I’ll be holding them for at least 50 years (hopefully).
On top of that core I have a few select direct share holdings in which I agree it’s most important to invest in a few great businesses. I keep much more of an eye on those than my index investments but still don’t mind short term fluctuations much… if at all.
that is also something - the key is to know what best fits you!
If you die before the 50 years make sure your heirs don't sell your investments because then they won't be allowed to grow for 50 years.
Make sure that you do not invest everything into one index try and diversify over several. Mutual funds now have a bad reputation but if you research them you will find good funds.
@@bighands69 oh 100%. I try to take as global a view as possible. Some people see index investing as just investing in Vanguards S&P 500 fund and leaving it at that. Not the way.
Dear Sven, could you analyze Croda next? seem like a value opportunity.
try making a suggestion here in the right format ruclips.net/video/EGyc6HHc6bI/видео.html
Great Sven! If you possible have the traslate in italian language? At least the subtitles. Many thanks.
ah, non ne ho il tempo :-( mi dispiace!
@@Value-Investing comunque l'intervento con Pietro Michelangeli è stato interessante e come scritto anche a lui, ho trovato le tue opinioni, valide e con fondamentali. Sarai uno stimolo per imparare di più l'inglese.
Thanks for another insightful video, Sven. I appreciate your content a great deal. I have two questions:
First, what reliable free resources do you use to identify index earnings yields?
Second, do you consider contrarian index investing a worthwhile strategy? By that I mean choosing unloved indexes with good earning/dividends yield. Similar to Sir John Templeton’s strategy with mutual funds. Without having checked the yields, it seems like Turkey and Japan may have some cheap indexes currently. Cheers.
1) Google - multpl - yardeni is also good
2) ah, still index funds for me!
@@Value-Investing thanks Sven, merry Christmas!
The fact remains that the vast majority of stock-pickers won't beat the market over the long term, no matter how much they 'study'. Stock-picking remains *by far* riskier than investing in a cap-weighted global index fund.
How is that a fact?
@@zekevfab have you read any of the stats on how badly active managers perform ?
@@zekevfab 85-90% of actively managed funds underperformed s&p index.
Not only that , active managers that did manage to beat the index are no more likely to continue beating it than an active manager who didn’t. This suggests that the few who do manage to beat it do so due to luck.
@@739jep great point.
Where do the figures of a return of 1/7x and a risk of 7x come from?
I agree with you ans Lynch but target date funds will continue to buy the SP. Thats is automatically and not valuation based
they can do whatever they want
Indexes returning 0% over the next 10 or 20 years is acceptable for people that are DCA’ing their pay checks every month. Of course I would rather purchase SPY shares at a fair price or discount, but the majority of us won’t be plowing large sums of cash in all at once. So in the long term, it matters very little the price I paid yesterday. 20 years flat (while collecting dividends) to amass the largest collection of SPY and then a massive bull run? Sign me the heck up!
thanks for sharing!
Also look at other index funds globally just us India performance was so much remarkable
thanks for sharing!
But but but Graham Stefan... Stopped investing in index funds, dumped most of my ETFs. Especially dumped ARK for a profit. ETFs don't let you pick your positions in stocks and charge you an expense percentage for it. Best "index fund" is perhaps the SPGP GARP fund or just buy Blackrock stock at a low and own a company that owns overpriced Index Funds/ETFs without paying expense ratio.
thanks for sharing!
The demise of index funds has been prophesied before … I’m not convinced
yes, Klarman talks about it in his book written in 1990, but still he did better!
Nobody ever mentions i-bonds in the US. They hedge inflation decently (way better than alternatives now). They can be sold after 1 year, so easy place to store some side cash.
ok, but then again, those fluctuate as inflation does!
@@Value-Investing Yup, occasionally they are worthless.
I like the comment about 40hours work vs 1hour money management. I think PL compared that in general we spend more time reviewing a microwave, than we do investments. I think about owning SPY being for my kids/grand kids, as it's unlikely that the market will be lower in 30years than it is now and my hunch is it will be ahead of inflation, even slightly. Plus it won't have the fees of a managed fund.
Is this thinking unreasonable?
the key is that you know what you own and whether it will lead you to YOUR goals!
Looking forward to Xiaomi's analysis! Ciao Sven!
thanks, coming soon!
Sven, when will you cover 10 european stocks?
yes, I have to work on that too!