@@_d0ser Yep. He also made most of his wealth in insurance rather than investing. So many people, for whatever reason, are not aware that Berkshire owns GEICO (and numerous other companies).
There was a book written titled "Where are the customers Yachts? By Fred Schwed written back in the 40s ...and it makes plain why most these Hedge fund guys are just making money off slicing up their clients money ...not by being investment geniuses !
Be Positive & Life Comes Around ! How's the Situation in USA ? Things are going from Bad to Worse in Mumbai , India . That Double Mutation Strain discovered last Year has wrecked havoc since March 2021 ! The Maharashtra State Govt is thinking of Complete Lockdown(we are already in 15 day partial lockdown ) .Other States like Uttar Pradesh & Delhi have Sunday lockdown & weekend lockdown respectively since this yesterday. That Double Mutation Strain spreads via Air (not only droplets) & evades /escapes the immune system .Even people who got 2 shots of Vaccine became sick .
yeah he wasnt the sole inventor of the index funds/etf etc but the fact that he promoted it so extensively for everybody is really what we needed. The best part is that he made the right choice
I've been doing this for 23 years now and it worked for me. The only difference for me was I held some bonds for a smoother ride. I'm too much of a chicken to hold 100% stocks, so I'm a 60/40 guy for life. 60% in the Vanguard 500 Index and 40% in the Vanguard Total Bond Index. Or just put 100% in the Vanguard Balanced Index Fund. I'm not unhappy with the results. I would have done even better if I did put 100% in the 500 Index like Warren says, but I think I would have lost my mind in 08 and 09.
Buffet may be the best value investor of all time, but Munger, who was a former attorney, was the guy who executed the "art of the deal" to get the sweet heart benefits. This ensured Buffet couldn't lose.
Manufacturing business in Hathaway company first Munger give advice to buy then Warren Buffett once try it but he fell in love it .so now 5 billlion profit earned from manufacturing industry business which is larger than insurance
@@aaryanmehta4609 Kraft Heinz merger and Bank of America bailout are a prime example of private deals rather than just investing. Buffet himself said Munger convinced him it’s better to buy a great company at a good price than buy cheap company for a great price.
@@aaryanmehta4609 Well. maybe Warren would do the same without Munger... but I choose to believe that we each need support of at least one respected peer in ways more than cerebral.
15,000 views, trust me, people want to feel special, and hedge fund managers know how to make wealthy people feel special and important, and they choose them over VOO, simple as that. VOO is not sexy, it doesn't tell you how smart you are, and how rich you are, it doesn't care about you, but it makes money for you.
Alfred Horg buffet explained it in the video. Rich people want to feel like they have access to top talent in industry to make them more money than anyone else. So the managers say yes, you have found the elusive top talent that will multiply your money better than any other vehicle.
Most people mention Benjamin Graham's Intelligent Investor as Buffet's foundation in investing. But most investors forget when he met Munger, his investing greatly departed from Grahams to implement Mungers.
Great name for the channel. I was fortunate enough to have a professor of finance while pursuing my accounting degree who said this very thing that’s being talked about whenever a student asked what they should invest in. Everyone wants the “secret stock” or “best money manager” to invest in. Your best bet is an index fund that follows the S&P that has minimal maintenance fees. I know that sounds boring, but if you want the best answer, that is it. He was the reason I chose to do a double major in finance to go along with my accounting degree (I had no intention of pursuing a double major before taking his class). He also convinced me to take on an econ minor, which I did. Very grateful to have been influenced and taught by him. It makes it much easier to see thru the BS when you have a solid foundation.
Be Positive & Life Comes Around ! How's the Situation in USA ? Things are going from Bad to Worse in Mumbai , India . That Double Mutation Strain discovered last Year has wrecked havoc since March 2021 ! The Maharashtra State Govt is thinking of Complete Lockdown(we are already in 15 day partial lockdown ) .Other States like Uttar Pradesh & Delhi have Sunday lockdown & weekend lockdown respectively since this yesterday. That Double Mutation Strain spreads via Air (not only droplets) & evades /escapes the immune system .Even people who got 2 shots of Vaccine became sick .
The book laughing at wall street touches on this. Mutual funds and 401ks just dont do better than the s&p, but they charge you 2% because you believe your funds are managed by an expert. Its a joke.
El Jay Vanguard has an S&P 500 index mutual fund that I use. Low management fees, and it serves a different goal than the ETFs and individual stocks that I own. It’s pretty much matched the S&P 500 and I don’t want to get robbed by the IRS when I retire in 40+ years, so it works out well for me.
vicco90 If you’re American (I don’t know if other countries have something similar), you have the option of going for a Roth IRA. Basically, you get taxed when you put money in, but not when you take it out in retirement. You’ll pay capital gains taxes on S&P 500 indexes when you sell them off to retire. I’m not touching my Roth IRA until I retire, but depending on what I want to do (ie start a business, have a safety net that gets more interest than cash in a savings account, etc.) I can sell them off when I feel like it. I’m young, so your plans might be different depending on how old you are and what your situation is, but that’s my reason for doing each.
What do you mean by 401ks? 401ks are a type of investment account. A 401k can't have performance by itself because it's just a place to hold money. You can invest in index funds in most 401k accounts.
@@johnnycanuck123video , Be Positive & Life Comes Around ! How's the Situation in USA ? Things are going from Bad to Worse in Mumbai , India . That Double Mutation Strain discovered last Year has wrecked havoc since March 2021 ! The Maharashtra State Govt is thinking of Complete Lockdown(we are already in 15 day partial lockdown ) .Other States like Uttar Pradesh & Delhi have Sunday lockdown & weekend lockdown respectively since this yesterday. That Double Mutation Strain spreads via Air (not only droplets) & evades /escapes the immune system .Even people who got 2 shots of Vaccine became sick .
He's learned this from Intelligent investor book and so did I, it's written there how index will mostly perform better than hedge funds. I am proud to say I have beaten the performance of some hedge funds by investing (20% of my portfolio) in USA, Australia and other Asian countries stock index funds.
Tobin K Warren Buffett beats hedge funds, but trash dump worker beats Warren Buffet for eleven years through 2017! howibeatgold.wordpress.com/2017/01/25/trash-dump-worker-invests-better-than-harvard-yale-and-columbia/
The problem lies in the misconception that the purpose of hedge funds is to make as much money as possible. The people who invest using hedge funds do not need to make any more money... They want to protect it.
Hedge funds are enormously profitable… for the hedge fund operators. Imagine raking in 2% of a wealthy client’s money without risking a dime of your own, whether your hedge fund goes up or down. Now THAT is a guaranteed return (for the operator, not the investor). Not to mention 20% if the fund actually makes money.
@@aaryanmehta4609I’m working for an asset management firm and almost all of our clients are institutional investors seeking uncorrelated assets with equity markets, high risk-adjusted returns, etc., all of which are crucial to institutional investors such as pension funds, insurance companies, and endowment funds because they need consistent cash flow to meet their obligations.
It's always more to the story. The real question is if the consultant is going to act in the best interest of their clients and look for growth and suitability, or are they really charging the client just to do nothing at all.
the terrifying part about this that it is probably true for any theory driven discipline. if you're dealing with 'experts' who aren't doing nuts and bolts level work you're probably better off in your ignorance than with their input.
Warren Buffett has common sense, however common sense is any thing but common. Greed drives people to take risks. "The greater the risk, the greater the reward" right? This may be true in individual cases, however Warren Buffett has proven that in the aggregate the rules are different. Absolutely no one can argue with his financial success.
warren and charlie are absolute legends. the hedge fund industry is an absolute joke. say goodbye to "2&20" and say hello to zero-commission and zero-expense ratio ETF's and mutual funds ..... thank you Mr. Bogle!
In all fairness, a value investor like Buffet (whom I respect) challenging other fundamental investors using hedge funds as their investment vehicle in all likelihood leaves out the most valuable investors on the planet: the quants. There are quant funds that have earned 100% per year over a 10-year period and others that have averaged 27% annually since 1974. No fundamental fund managers -- or the S&P index funds -- have even come close. Many quants were so profitable they have gone private, but still continue to create incredible results and billions of dolars for their founders year-in and year-out. See, for example, Renaissance.
For the average folk trying to retire, index is a great way to go... Warrens method is simple but not easy. Most value investors can't even put up returns like him.
Most the Financial Engineering / Quantitative Finance and other Physical Science graduates end up at hedge funds. They make things purposely look so complicated because that is their job! Hedge Funds are there to make simple things look difficult, to justify the performance fees /loads they charge as a percentage of NAV - Net Asset Value. Most of the customers and regulators don't understand mathematics or physics and other sophisticated computational statistical /data science jargon. So, they fall for it!
I think that the main reason for this is, a lot of hedge funds use options and other "insurances" to cover their positions, to "hedge" themselves, so when the S&P 500 performs well, they earn well. But when the S&P 500 loses a lot. They lose at lot less like in 2008. Add the fees on top of that, and you have what Warren Buffett is saying.
The reason why many hedge funds are worse than junk is the fact they are run worse than junk. If you go with any so called fund that focuses on day trading, ups and downs, high fees and constantly pushing share issues for no reason other than to sound cool then it will be a mess. Buying and constantly selling shares for no reason is not a good thing and it most certainly is not investing.
A point of a hedge fund is to HEDGE against the market in a case of a downturn. The people throwing their money into HEDGE funds, also throw their money into other Index funds and ETFs but choose to leave the nitty gritty hedging process to the experts.
The point of hedge funds is that the SEC allows you to use more complex financial instruments to amplify returns if your clients are all accredited investors. They also perform terribly during recessions. You literally stated the opposite of the truth
My Depression era mother always said you put money into stocks you can afford to lose. It's not a place for college funds, etc. Advice that served me well in 2008.
Gordon Adams what about the 10 years after 2008? You could have ridden the Dow from 6500 to 26000. Dollar cost averaging the S&P500 is fabulous over the long term, when you are nearing retirement start moving over to quality bonds
@@NateB I would. If the stock market crashed and I lost everything forever or it crashed and stayed low for years and years I'd bigger problems than not having money because some serious shit went down. You slowly start to sell and transition into other assets as you get older so you're not forced to sell at a low price. I bet if you dont panic and sell and have a well diversified portfolio you'd make it out of the great depression somewhat okay and then give it a while and youd be better off than before it.
though Robinhood ain't exactly free... majority of retail traders won't worry about being front run so it's a good model... been waiting for something like this to hit Australia and there is now one called Stake... Robinhood article here (startupsventurecapital.com/robinhoods-exceptionally-clever-business-model-arbitraging-privacy-776663d4d855)
Rad Dalio is/was a hedge manager I think he is now retiring. BUt he has outperfom the market and the S&P500. His HF doesn't accept clients since 2004. there are plenty of very succesfull HF managers as well. But Buffet point is good, many charge exhuberant amounts of commissions
I agree with Warren Buffett, the S&P 500 is a very well balanced index fund, you can either buy a vanguard index fund or a vanguard ETF VOO and buy it with very little management fee .04% basically almost no fees and if you want even better results combine VOO and VGT which is the vanguard information technology ETF and probably the best index fund right now. I own both VOO and VGT and convined with some other stocks like apple, AMD, Costco, Home Depot, Nike, Roku etc. I been getting 10-15% rate of return monthly
Exactly the point - where is the line on the chart for Berkshire performance? If there were one, it would show Berkshire's gain at roughly 130% during the period in question. A bit of an omission there Mr. Buffett. This is a sales presentation by him and a deceptive one.
Hedge funds go short in order to enhance their long positions hence the word hedge fund. Berkshire does not short anything significant. It does, from time to time, have short positions to smooth out things like oil prices, but every airline or railroad company does this. Berkshire is not a hedgefund but a holding company.
Ordinary people or the average Joe/Jane feel that when they pay "experts" they get better results. They go to a finacial advisorsr and they get sold products by hedgefund managers. They feel unsophisticated enough to do "wall street stuff."
I think Buffet is missing the point about hedge funds. The purpose of hedge funds, as a general principle, is not to try to "beat the market", but rather to reduce the risk of your overall portfolio while still making money. Hedge funds do this by apply investment/trading techniques that make money in ways that are not correlated to the general performance of the stock market. i.e. so that if the stock market falls, the value of the hedge fund investment won't change (on average, though its performance might be quite volatile due to other factors). For example a hedge fund might see small correlations between the price of a raw material, and the share price of companies transporting that material (and put on trades when the two get out of sync a little, in the hope that they get back into sync again, generating a small a profit).
@AerialExplorer what you say atout edge fund is true but Buffet's point is that in the long (real long, like 10-30 years) the index fund beats the edge fund. Risk and volatility becomes less and less of a concern the longer you stay in the market (assuming the market doesn't crash when you want to cash out which is why the older you become the more of your portfolio should be bond instead of stock). Volatility is a concern in the short run not in the long run. If today you buy s&p500 and it crushes tomorrow but you stick with it (assuming the global economy will be for the next 30 years as it has been for the last 30 years, which, considering emerging markets and the different global scenario I personally don't think will hold true but whatever) for the next 30 years tomorrow crush is not important as proven by the table Warren shows in the video. So yes, hedge fund reduce risk during crisis and high volatility times as proven by the table during year 2008 but in the long run is not as important. The main problem with what Buffet is saying is that most people don't have the mental coolness to keep the index fund during a crash (which of course is not Buffet's problem and neither does it prove him wrong)
I've been studying the hedge fund industry for a time now, and there are only a few(like 1%) hedge funds that are really legit. Renaissance Technologies, Baupost Group, Abrams Capital, Blue Ridge, DE Shaw, etc. Are some examples of legit examples, but they are a minority.
@Daniel La Zarr the ones I mentioned have a track record that goes back many years. It is impossible to be lucky for 15 years in a row. Tge average hedge fund may not beat the S&P, but there's a minority that does. Look at Reinassance(specially their Medallion fund).
Did you see Jim's performance in 2020? His dear clients all want to leave. The algo's sold in panic during corona and the computer algo hedged the upside causing no recovery. Double losses.
YES YOU ARE RIGHT NOBODY(ESPECIALLY AMC /MF/HF) 🙅 CAN BEAT 👊ATHEIST👑 WARREN BUFFETT👑 NO. 1-INVESTOR IN LONG-TERM ON BIG FUND 😁LIKE BERKSHIRE HATHAWAY -1 TRILLION US DOLLAR MKT CAP(APPROX)SILVER BITCOIN -2021-ALL TIME HIGH
Hedge funds are not really meant to make money? They are supposed to not lose money. Basically they invest in "both sides of a bet". For example there's the Ark Innovation fund and there's a fund that's "anti-Ark Innovation". Hedge funds invest in both. When one goes down, another goes up.
People always ask me if I feel stocks are equal or more valuable that investment property. More profitable in a sense you may yield higher return. Sure but higher return on what? Your own money... Investment property I yield a return on the banks money... 10% of a 100k is 10k, yes very good.... I like that. Ok 8% of 500k is 40k. I'm just saying try and do both.
Erik johnson 😂 you obviously never rented out property, fees, taxes, mortgage insurance, house insurance, months without renters. Commercial real estate is where any pro invest
@@907living6 Depends what market your in big guy. Commercial real estate in Boston MA where I live. Yes, you have to be a pro. As in a corporation or have an outstanding credit line with a large debt to equity ratio on an LLC because to put 20% down, solicit a tenant and structure a lease takes big big dollars. I'm out here on my own right now. Thanks for the support chuckles.
Good to have some pre-tax money too. As the tax code stands now, you get $12-25k standard deduction that would be worthless if withdrawing from roth account only. Also, leverage isnt entirely bad. Getting low interest loan and reinvesting elsewhere returning higher interest is a great way to boost net worth.
These two column. That show the earning different income resources. In the 2008 S&P negative in earning and other investment to different company may be by business or Illinois business such as the future also have the loss
He doesn't explain why the other half "have" to do worse: it is because, if both as a group have to get the average return, the group with lower transaction costs will do better.
A lot of folks harp on about the performance of the S&P as a reflection of the American economy, but what about the world as a whole? Any unifying perspective on future trends of the global economy as a whole that might guide buying international indexes?
@ken macdonald the problem is with the system that lets people abuse tax refunds. If they didn't have tax refunds taxes wouldn't be as high to make up for the loss and the irs wouldn't have such a high overhead saving more money for the government.
I hope to god Buffett and Charlie have distilled their wisdom down to the next generation in their organisation and that this extremely unusual and radical common sense knowledge is passed on.
Is there a way to short hedge funds? We can buy S&P Index fund as a hedge and make money from the arbitrage over a longer period, because hedge funds will always lag Index (barring 1-2 year exceptional years).
Not only do hedge funds get 2/20, they get the capital interest loophole. So they pay capital gains tax rate on most of the money, even though they're NOT even risking their own money. That's obscene
Index funds are very good for investors with little insight. I have done it successfully. There are other reasons for investment advisers. Such as: What happens if you get Alzheimer or Dementia? What if you can not financially trust members of your family? You can loose all your investments from actions of a corrupt caretaker. Happened to many.
If everybody buys a s&p 500 index it won’t probably work. Warrem probably doesn’t remember that he charged 25% and paid 6% interest when he created the partnerships. Hedge Funds are competition for Buffett it will be much easier for him if they wouldn’t be around.
I invest in ITOT total market index ETF. 3 basis points per year in fees...it's basically free. If you are ok with mutual funds, fidelity offers completely free total market funds now. Why would anyone pay a hedge fund manager??
Hedge funds and the S&P index are comparable. However, looking at the returns alone is a wrong way of comparing the two. It is possible that the index got a higher return because it's composed of more riskier stocks. Since hedge funds hedge away risks, then returns would tend to be lower as well but the returns should be higher relative to the amount of risk taken. There are proper ways to compare the two tho. Using ratios or measures that take into account the risks taken for a given return should do the job.
It's called a Sharpe Ratio. Even though the original idea of hedge funds was to hedge away risk, that is not how they function these days (largely because the fee structures incentivize more risk taking). Most "hedge" funds are much riskier and have lower Sharpe ratios than the S&P index or the Vanguard Total Stock Market Index Fund.
Isn't this a bit misleading without accounting for risk? Is it possible the hedge fund risk was much lower than the index risk? Shouldn't we be looking at risk to return rather than just return?
2020: many investors left or wanted to leave Jim Simmon's funds, his algo's did terrible, sold during the corona and hedged the recovery, double mistake by the algo's
@@rm1201 There are 2 funds managed by renaissance, one is for regular investors and one is locked for regular investors. The one that is inferior experienced the drawdown, the medallion fund is still giving usual returns.
From what I understand, even though Simons returned more on average, his algos only worked for $10billion or less. Buffett manages an enormous amount hence is less flexible. Thats my amateur explanation.
Hey guys from comment section it seems most of you guys are not sophsticated. Thats okay. Hedge Funds should not be compared to index funds because 1) portfolio weighting is different 2) they hedge their positions. Particular hedge fund strategy should be compared to its own benchmark - example stock equity arbitrage which creates alpha (excess returns) cannot be compared to risky equity index
Hedge funds shouldn't be compared with index funds? The whole point of investing is to make money, point blank. Sure, I get what you're saying. Say the goal in life is to own the fastest mode of transportation ever. If I own an airplane and my friend owns a bicycle, which are obviously not in the same category and will have different benchmarks. A fighter jet is going to be faster than a Cessna, but a Cessna is still going to be faster than any bicycle. Airplanes=index funds, bicycles=hedge funds. Do you want any more comparisons?
I get what he's saying. Hedge funds and an index are comparable. However, looking at the returns alone is a wrong way of comparing the two. It is possible that the index got a higher return because it's composed of more riskier stocks. Since hedge funds hedge away risks, then returns would tend to be lower as well but the returns should be higher relative to the amount of risk taken. There are proper ways to compare the two tho. Using ratios or measures that take into account the risks taken for a given return should do the job.
@@JackAtPage I get what he's saying. Hedge funds and an index are comparable. However, looking at the returns alone is a wrong way of comparing the two. It is possible that the index got a higher return because it's composed of more riskier stocks. Since hedge funds hedge away risks, then returns would tend to be lower as well but the returns should be higher relative to the amount of risk taken. There are proper ways to compare the two tho. Using ratios or measures that take into account the risks taken for a given return should do the job.
@@gasparjuico9528 I see that perspective too. From a 25 year old investor and learning all I can from the best of long term investors, I see no reason to invest in hedge funds. I'm not the next Lynch or Buffett and have no expectations of being one. I need to learn more about he hedge funds too I guess. That might have prevented this conversation haha
To assess the performance of a hedge fund manager (i.e. stock-picking for example, one must evaluate the information ratio of the manager) The returns do not tell you the real story owing to the hard hurdle rate, high water marks, 2 &20 fee structure and other constructs in the fee structure that eat into the returns. One of the best indicators for real performance for hedge (entirely my personal opinion) is the assets under management because the 2% is calculated of the assets under management so they must also ensure asset quality, since 2% is the operationally linked (loosely, working capital) which would be a good indicator of their short term going concern. A red flag would be an asset and maturity mismatch ( financing long term obligations using short term financing) .this is a typical case of maturity mismatch that also exposes the fund to market risk and if their financing their foreign operations, throw in FX risk as well. Moral of the story : Bond market > FX market > Stock market. PS: I apologise for getting carried away.
The industries oversea has loss as well as chemical industries. As home future bad no income could be can not sale and export to oversea or by bad weather that cause farms damaging.
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"There´s been far, far, far more money made by people in Wall Street through salesmanship abilities than through investment abilities." W. Buffett
when there is a gold rush, sell shovels.
I was stung once! My mama didn't raise a fool
He is so good at painting a big picture with only a few words.
Marketing the myth of trading just keeps on giving
@@andersbodin1551 i was gonna say that:)
I wanna start my own hedge fund, "the fund that outplays the funds" It will consist 100% of the S&P500 index
He said the cumulative had a 40 something point lead
Can i send you money?
You mean owning every business in America. Good Luck buddy
@ger du And it's the next bubble!
ger du Yeah but you don’t tell that to you clients, and take your cut
Warren is loved, not just because he is rich but for his transparency.
💯
He does give reasonably good advice but he is translucent
He's not transparent. Quite the opposite in fact.
@@_d0ser Yep. He also made most of his wealth in insurance rather than investing. So many people, for whatever reason, are not aware that Berkshire owns GEICO (and numerous other companies).
@@cameronmcgehee pretty sure almost everyone knows Berkshire made their money from Geico. It's in the 101 introductory class to Berk.Hathaway.
Those 40 dislikes are from Hedgefund managers
Lol
It's 55 fund managers now
76
Farouq Muhammad Aliyu 79
Lol
There was a book written titled "Where are the customers Yachts? By Fred Schwed written back in the 40s ...and it makes plain why most these Hedge fund guys are just making money off slicing up their clients money ...not by being investment geniuses !
borderlord correct.. brokers are SALESPEOPLE not financial planners. big distinction.
Be Positive & Life Comes Around ! How's the Situation in USA ? Things are going from Bad to Worse in Mumbai , India . That Double Mutation Strain discovered last Year has wrecked havoc since March 2021 ! The Maharashtra State Govt is thinking of Complete Lockdown(we are already in 15 day partial lockdown ) .Other States like Uttar Pradesh & Delhi have Sunday lockdown & weekend lockdown respectively since this yesterday.
That Double Mutation Strain spreads via Air (not only droplets) & evades /escapes the immune system .Even people who got 2 shots of Vaccine became sick .
@@kedarbarve5884 Nobody gives shlt about 3rd worId dump
That's why is love Jack bogle, founder of vanguard, a saint in the eyes of many.
yeah he wasnt the sole inventor of the index funds/etf etc but the fact that he promoted it so extensively for everybody is really what we needed. The best part is that he made the right choice
I've been doing this for 23 years now and it worked for me. The only difference for me was I held some bonds for a smoother ride. I'm too much of a chicken to hold 100% stocks, so I'm a 60/40 guy for life. 60% in the Vanguard 500 Index and 40% in the Vanguard Total Bond Index. Or just put 100% in the Vanguard Balanced Index Fund. I'm not unhappy with the results. I would have done even better if I did put 100% in the 500 Index like Warren says, but I think I would have lost my mind in 08 and 09.
Market might crash within a few years. I think your choice for bonds is very wise. You just never know.
@deee dawwwggg why do you eat food do work when you die in the end .Just starve for 3 days after birth you will die on fourth day
@deee dawwwggg That is exactly what I am saying mate your comment looked negative and you feel depressed just move on
Not everyone is married or you can do like I have and married a women who makes 10 X my yearly salary, it s called marrying into money.
Very smart portfolio. My guess is that you will/have outperformed the vast majority of investors over your holding period.
Buffet may be the best value investor of all time, but Munger, who was a former attorney, was the guy who executed the "art of the deal" to get the sweet heart benefits. This ensured Buffet couldn't lose.
true
There was no deal making crucial to Buffet’s success. Munger himself said Warren would’ve done the same without him
Manufacturing business in Hathaway company first Munger give advice to buy then Warren Buffett once try it but he fell in love it .so now 5 billlion profit earned from manufacturing industry business which is larger than insurance
@@aaryanmehta4609 Kraft Heinz merger and Bank of America bailout are a prime example of private deals rather than just investing. Buffet himself said Munger convinced him it’s better to buy a great company at a good price than buy cheap company for a great price.
@@aaryanmehta4609 Well. maybe Warren would do the same without Munger... but I choose to believe that we each need support of at least one respected peer in ways more than cerebral.
He came here to talk finance and eat peanut brittle... and hes all out of peanut brittle.
he lives.
Are they drinking coke out of wine glasses and eating a box of peanut brittle?
Yep!!!!20 cokes a day!!!!!!!!!!!!! Yikes !!!! Peanut brittle from sees candies (I think) !!!
yo, those are water glasses ...short stem ... now you know which to drink what from if you ever get invited
Legendary
Warren is marketing for them... He as a lot of money in KO
Successful companies they're invested in.
"a terrible result for the hedge funds, not a terrible result for the hedge fund managers"
15,000 views, trust me, people want to feel special, and hedge fund managers know how to make wealthy people feel special and important, and they choose them over VOO, simple as that. VOO is not sexy, it doesn't tell you how smart you are, and how rich you are, it doesn't care about you, but it makes money for you.
49fiori How do hedge funds make rich people feel special? Free hookers and blow?
Alfred Horg buffet explained it in the video. Rich people want to feel like they have access to top talent in industry to make them more money than anyone else. So the managers say yes, you have found the elusive top talent that will multiply your money better than any other vehicle.
VOO?
Cut de Pie Fails ticker symbol
Warren reminds me of the Grandfather everyone would love to have.
A legend.
☺☺☺
Most people mention Benjamin Graham's Intelligent Investor as Buffet's foundation in investing. But most investors forget when he met Munger, his investing greatly departed from Grahams to implement Mungers.
How so?
I suppose he's referring to the shift from cigar butts to cigars? IOW: great companies at good (vs bargain) prices?
@@Shubham.Katyal Jay answered it pretty well.
Great name for the channel. I was fortunate enough to have a professor of finance while pursuing my accounting degree who said this very thing that’s being talked about whenever a student asked what they should invest in. Everyone wants the “secret stock” or “best money manager” to invest in. Your best bet is an index fund that follows the S&P that has minimal maintenance fees. I know that sounds boring, but if you want the best answer, that is it. He was the reason I chose to do a double major in finance to go along with my accounting degree (I had no intention of pursuing a double major before taking his class). He also convinced me to take on an econ minor, which I did. Very grateful to have been influenced and taught by him. It makes it much easier to see thru the BS when you have a solid foundation.
Be Positive & Life Comes Around ! How's the Situation in USA ? Things are going from Bad to Worse in Mumbai , India . That Double Mutation Strain discovered last Year has wrecked havoc since March 2021 ! The Maharashtra State Govt is thinking of Complete Lockdown(we are already in 15 day partial lockdown ) .Other States like Uttar Pradesh & Delhi have Sunday lockdown & weekend lockdown respectively since this yesterday.
That Double Mutation Strain spreads via Air (not only droplets) & evades /escapes the immune system .Even people who got 2 shots of Vaccine became sick .
The book laughing at wall street touches on this. Mutual funds and 401ks just dont do better than the s&p, but they charge you 2% because you believe your funds are managed by an expert. Its a joke.
El Jay Vanguard has an S&P 500 index mutual fund that I use. Low management fees, and it serves a different goal than the ETFs and individual stocks that I own. It’s pretty much matched the S&P 500 and I don’t want to get robbed by the IRS when I retire in 40+ years, so it works out well for me.
@@johnnycanuck123video Can you elaborate more? I'm Interested
vicco90 If you’re American (I don’t know if other countries have something similar), you have the option of going for a Roth IRA. Basically, you get taxed when you put money in, but not when you take it out in retirement. You’ll pay capital gains taxes on S&P 500 indexes when you sell them off to retire. I’m not touching my Roth IRA until I retire, but depending on what I want to do (ie start a business, have a safety net that gets more interest than cash in a savings account, etc.) I can sell them off when I feel like it. I’m young, so your plans might be different depending on how old you are and what your situation is, but that’s my reason for doing each.
What do you mean by 401ks? 401ks are a type of investment account. A 401k can't have performance by itself because it's just a place to hold money. You can invest in index funds in most 401k accounts.
@@johnnycanuck123video , Be Positive & Life Comes Around ! How's the Situation in USA ? Things are going from Bad to Worse in Mumbai , India . That Double Mutation Strain discovered last Year has wrecked havoc since March 2021 ! The Maharashtra State Govt is thinking of Complete Lockdown(we are already in 15 day partial lockdown ) .Other States like Uttar Pradesh & Delhi have Sunday lockdown & weekend lockdown respectively since this yesterday.
That Double Mutation Strain spreads via Air (not only droplets) & evades /escapes the immune system .Even people who got 2 shots of Vaccine became sick .
These guys are a National Treasure.
It's a simple investment strategy. Buy low cost index funds that benchmark the s&p 500, dollar cost average, buy and hold.
If you want low returns, sure.
@@R3tr0v1ru5 low returns? How so?
He's learned this from Intelligent investor book and so did I, it's written there how index will mostly perform better than hedge funds. I am proud to say I have beaten the performance of some hedge funds by investing (20% of my portfolio) in USA, Australia and other Asian countries stock index funds.
Haha, he didnt learn it from some investor book, he WROTE the book and all others copied him.
@@johnkidd1226 Benjamin Graham wrote the book Intelligent Investor. Buffett was a student of Benjamin Graham and his biggest/best disciple.
steven rushbrook bitcoin
excellent.. absolutely excellent. Warren Buffett just stuck it to Hedge fund groups. Great simple proven strategy! I'm a believer..
Tobin K Warren Buffett beats hedge funds, but trash dump worker beats Warren Buffet for eleven years through 2017!
howibeatgold.wordpress.com/2017/01/25/trash-dump-worker-invests-better-than-harvard-yale-and-columbia/
I heard that a company named Citadel found a way to ALWAYS beat the market.
Total respect for Mr. Buffet. He made his fortune on his own.
The problem lies in the misconception that the purpose of hedge funds is to make as much money as possible. The people who invest using hedge funds do not need to make any more money... They want to protect it.
What’s the point of you can’t even beat an index
Exactly right. The point of a hedge is a HEDGE AGAINST RISK. It's preservation.
Hedge funds are enormously profitable… for the hedge fund operators. Imagine raking in 2% of a wealthy client’s money without risking a dime of your own, whether your hedge fund goes up or down. Now THAT is a guaranteed return (for the operator, not the investor). Not to mention 20% if the fund actually makes money.
@@aaryanmehta4609I’m working for an asset management firm and almost all of our clients are institutional investors seeking uncorrelated assets with equity markets, high risk-adjusted returns, etc., all of which are crucial to institutional investors such as pension funds, insurance companies, and endowment funds because they need consistent cash flow to meet their obligations.
Charlie keeps looking at that peanut brittle
Please don't make fun of him
He's almost blind.
@@marshalsaini9619 not making fun. I think he wants that peanut brittle.
@@backspace4353 ok I get it
1. The Medallion fund /RenTech
2. Tudor fund
3. Bridgewater Associates
4. Citadel
5. Tower Research
1/2 trillion dollars vs bunch of leeches
It's always more to the story. The real question is if the consultant is going to act in the best interest of their clients and look for growth and suitability, or are they really charging the client just to do nothing at all.
the terrifying part about this that it is probably true for any theory driven discipline. if you're dealing with 'experts' who aren't doing nuts and bolts level work you're probably better off in your ignorance than with their input.
Warren Buffett has common sense, however common sense is any thing but common. Greed drives people to take risks. "The greater the risk, the greater the reward" right? This may be true in individual cases, however Warren Buffett has proven that in the aggregate the rules are different. Absolutely no one can argue with his financial success.
What he is saying here is true and beyond belief. Most people have no idea
warren and charlie are absolute legends.
the hedge fund industry is an absolute joke. say goodbye to "2&20" and say hello to zero-commission and zero-expense ratio ETF's and mutual funds ..... thank you Mr. Bogle!
In all fairness, a value investor like Buffet (whom I respect) challenging other fundamental investors using hedge funds as their investment vehicle in all likelihood leaves out the most valuable investors on the planet: the quants. There are quant funds that have earned 100% per year over a 10-year period and others that have averaged 27% annually since 1974. No fundamental fund managers -- or the S&P index funds -- have even come close. Many quants were so profitable they have gone private, but still continue to create incredible results and billions of dolars for their founders year-in and year-out. See, for example, Renaissance.
DaveKtver
What the relevance of that if the fund is by invitation only?
Buffet didn’t restrict the guy from picking quant funds
For the average folk trying to retire, index is a great way to go... Warrens method is simple but not easy. Most value investors can't even put up returns like him.
They look like Statler and Waldorf from the Muppets up there
Voltaire so true! Lol
Omg best comment ever!
Lmao
you guyz never gona come out of your TV thingy
Who is here from financial educations video?
Most the Financial Engineering / Quantitative Finance and other Physical Science graduates end up at hedge funds. They make things purposely look so complicated because that is their job! Hedge Funds are there to make simple things look difficult, to justify the performance fees /loads they charge as a percentage of NAV - Net Asset Value.
Most of the customers and regulators don't understand mathematics or physics and other sophisticated computational statistical /data science jargon. So, they fall for it!
I think that the main reason for this is, a lot of hedge funds use options and other "insurances" to cover their positions, to "hedge" themselves, so when the S&P 500 performs well, they earn well. But when the S&P 500 loses a lot. They lose at lot less like in 2008. Add the fees on top of that, and you have what Warren Buffett is saying.
The reason why many hedge funds are worse than junk is the fact they are run worse than junk. If you go with any so called fund that focuses on day trading, ups and downs, high fees and constantly pushing share issues for no reason other than to sound cool then it will be a mess.
Buying and constantly selling shares for no reason is not a good thing and it most certainly is not investing.
3:53 Young Buffet's voice?
Mean While Charlie having War Flashbacks.
A point of a hedge fund is to HEDGE against the market in a case of a downturn. The people throwing their money into HEDGE funds, also throw their money into other Index funds and ETFs but choose to leave the nitty gritty hedging process to the experts.
Hedge funds often underperform the index in a bear market
The point of hedge funds is that the SEC allows you to use more complex financial instruments to amplify returns if your clients are all accredited investors. They also perform terribly during recessions. You literally stated the opposite of the truth
Their purpose is actually to avoid many regulations and steal from their customers
My Depression era mother always said you put money into stocks you can afford to lose. It's not a place for college funds, etc. Advice that served me well in 2008.
Gordon Adams what about the 10 years after 2008? You could have ridden the Dow from 6500 to 26000. Dollar cost averaging the S&P500 is fabulous over the long term, when you are nearing retirement start moving over to quality bonds
You still don't put in money you can't afford to lose.
But yeah you invest the rest I would hope
@@NateB I would. If the stock market crashed and I lost everything forever or it crashed and stayed low for years and years I'd bigger problems than not having money because some serious shit went down. You slowly start to sell and transition into other assets as you get older so you're not forced to sell at a low price. I bet if you dont panic and sell and have a well diversified portfolio you'd make it out of the great depression somewhat okay and then give it a while and youd be better off than before it.
@@matth23e2
Dollar cost averaging still worked during the great depression and produced 6% growth which is fantastic considering the enviroment.
When Charlie coughs;
That means its time to roll out!
Kurt Hajroja ROFLMFAO
day trading is a waste of money
you have to pay commissions ...
your broker is getting rich not YOU!
Limitless 1 You’re telling me I have to pay 5 dollars for a possibility to make an infinite amount??? You’re stupid
TheArmy5141 trading = compounding fee and tax
There is an app called Rohinhood, did you just get out of the woods?
though Robinhood ain't exactly free... majority of retail traders won't worry about being front run so it's a good model... been waiting for something like this to hit Australia and there is now one called Stake... Robinhood article here (startupsventurecapital.com/robinhoods-exceptionally-clever-business-model-arbitraging-privacy-776663d4d855)
correction - it's not exactly front running - its more order flow but still.. when the product is free, you're the product =P
Warren, when you get a chance, please tell CalPERS about index funds.
Rad Dalio is/was a hedge manager I think he is now retiring. BUt he has outperfom the market and the S&P500. His HF doesn't accept clients since 2004. there are plenty of very succesfull HF managers as well. But Buffet point is good, many charge exhuberant amounts of commissions
Rene Amaton, Good hedge funds do beat the index, their returns look low because they gobbled up the difference$ for themselves.
Curious thing is that his trading basics are quite simple too. He tracks a couple of macros and judges his investments based on those.
HF had the worst returns since inception because of QE. When you add volatility HF's perform well
I agree with Warren Buffett, the S&P 500 is a very well balanced index fund, you can either buy a vanguard index fund or a vanguard ETF VOO and buy it with very little management fee .04% basically almost no fees and if you want even better results combine VOO and VGT which is the vanguard information technology ETF and probably the best index fund right now. I own both VOO and VGT and convined with some other stocks like apple, AMD, Costco, Home Depot, Nike, Roku etc. I been getting 10-15% rate of return monthly
10% return monthly???? Wow
*Is that a glass of coke next to Charlie and Warren? hahah*
And he’s being further vindicated as hedge funds continue to reach new inspiring lows.
I am a bit confused. Isnt actually that Berkshire also tries to beat the average contradicting what he says?
Exactly the point - where is the line on the chart for Berkshire performance? If there were one, it would show Berkshire's gain at roughly 130% during the period in question. A bit of an omission there Mr. Buffett. This is a sales presentation by him and a deceptive one.
Finally, someone doing the power of "sitting on your ass" justice. Doormen worldwide rejoice.
how does anyone not know this? just look at the charts of the major indices
I didn't know this because i haven't watched this before
Including Nikkei? had you invested in 1991, you are at par now, before inflation.
JKJUNIOR95 because people are mostly lazy, and want the quick easier option.
Because Wall Street and the media have tricked people into thinking they are scientists and not shitty gamblers.
And here I am in the middle of the desert with nothing working on a ranch killing myself everyday. Oh life, so cruel.
Hidden gem channel 💎
You just KNOW Warren is the most hung investor in that arena.
hard to believe people use hedge fund managers still
Hedge funds go short in order to enhance their long positions hence the word hedge fund. Berkshire does not short anything significant. It does, from time to time, have short positions to smooth out things like oil prices, but every airline or railroad company does this. Berkshire is not a hedgefund but a holding company.
it's not anna..... it's a holding company
Ordinary people or the average Joe/Jane feel that when they pay "experts" they get better results. They go to a finacial advisorsr and they get sold products by hedgefund managers. They feel unsophisticated enough to do "wall street stuff."
What do you call the 25% of profit then if it's not fees and commission?
Warren Buffett is a Hedge Fund Manager who managed a pool of capital.
That didn’t include higher taxes because of the Hedge Funds stocks that are sold.
5:01 DJT reference lmao
When I heard him say "Low Energy", I lost it!
I think Buffet is missing the point about hedge funds. The purpose of hedge funds, as a general principle, is not to try to "beat the market", but rather to reduce the risk of your overall portfolio while still making money. Hedge funds do this by apply investment/trading techniques that make money in ways that are not correlated to the general performance of the stock market. i.e. so that if the stock market falls, the value of the hedge fund investment won't change (on average, though its performance might be quite volatile due to other factors). For example a hedge fund might see small correlations between the price of a raw material, and the share price of companies transporting that material (and put on trades when the two get out of sync a little, in the hope that they get back into sync again, generating a small a profit).
AerialExplorer you are so right! You definitely know more than Warren Buffet. I’m so thankful you shared your ignorant, stupid opinion with us.
@AerialExplorer what you say atout edge fund is true but Buffet's point is that in the long (real long, like 10-30 years) the index fund beats the edge fund. Risk and volatility becomes less and less of a concern the longer you stay in the market (assuming the market doesn't crash when you want to cash out which is why the older you become the more of your portfolio should be bond instead of stock). Volatility is a concern in the short run not in the long run. If today you buy s&p500 and it crushes tomorrow but you stick with it (assuming the global economy will be for the next 30 years as it has been for the last 30 years, which, considering emerging markets and the different global scenario I personally don't think will hold true but whatever) for the next 30 years tomorrow crush is not important as proven by the table Warren shows in the video. So yes, hedge fund reduce risk during crisis and high volatility times as proven by the table during year 2008 but in the long run is not as important. The main problem with what Buffet is saying is that most people don't have the mental coolness to keep the index fund during a crash (which of course is not Buffet's problem and neither does it prove him wrong)
Don't know the exact dates shown, but BRK-A did approx 66% gain or just a little better than S&P.
Pretty much Kraft Heinz is to blame for that one
We need to learn the fail and not repeat the same mistake. You learn from other business fail and security fail. And try not to run like them
I've been studying the hedge fund industry for a time now, and there are only a few(like 1%) hedge funds that are really legit. Renaissance Technologies, Baupost Group, Abrams Capital, Blue Ridge, DE Shaw, etc. Are some examples of legit examples, but they are a minority.
@Daniel La Zarr the ones I mentioned have a track record that goes back many years. It is impossible to be lucky for 15 years in a row. Tge average hedge fund may not beat the S&P, but there's a minority that does. Look at Reinassance(specially their Medallion fund).
Never bet against Buffet !
2,500 likes from ETF/ Index Fund investors and 90 dislikes from Hedge Fund Manager
RUclips's timing...
jim simons vs warren buffet
Now we're talking ;)))
Did you see Jim's performance in 2020? His dear clients all want to leave. The algo's sold in panic during corona and the computer algo hedged the upside causing no recovery. Double losses.
YES YOU ARE RIGHT NOBODY(ESPECIALLY AMC /MF/HF) 🙅 CAN BEAT 👊ATHEIST👑 WARREN BUFFETT👑 NO. 1-INVESTOR IN LONG-TERM ON BIG FUND 😁LIKE BERKSHIRE HATHAWAY -1 TRILLION US DOLLAR MKT CAP(APPROX)SILVER BITCOIN -2021-ALL TIME HIGH
Hedge funds are not really meant to make money? They are supposed to not lose money. Basically they invest in "both sides of a bet". For example there's the Ark Innovation fund and there's a fund that's "anti-Ark Innovation". Hedge funds invest in both. When one goes down, another goes up.
THIS IS AWESOME
People always ask me if I feel stocks are equal or more valuable that investment property. More profitable in a sense you may yield higher return. Sure but higher return on what? Your own money... Investment property I yield a return on the banks money... 10% of a 100k is 10k, yes very good.... I like that. Ok 8% of 500k is 40k. I'm just saying try and do both.
Erik johnson 😂 you obviously never rented out property, fees, taxes, mortgage insurance, house insurance, months without renters. Commercial real estate is where any pro invest
@@907living6 Depends what market your in big guy. Commercial real estate in Boston MA where I live. Yes, you have to be a pro. As in a corporation or have an outstanding credit line with a large debt to equity ratio on an LLC because to put 20% down, solicit a tenant and structure a lease takes big big dollars. I'm out here on my own right now. Thanks for the support chuckles.
Pay your bills, that's the best investment. Low debts and open a Roth ira
Good to have some pre-tax money too. As the tax code stands now, you get $12-25k standard deduction that would be worthless if withdrawing from roth account only. Also, leverage isnt entirely bad. Getting low interest loan and reinvesting elsewhere returning higher interest is a great way to boost net worth.
I am struggling how to relate this to Buffet's dislike of diversification. Why buy the s&p instead of value investing?
These two column. That show the earning different income resources. In the 2008 S&P negative in earning and other investment to different company may be by business or Illinois business such as the future also have the loss
He doesn't explain why the other half "have" to do worse: it is because, if both as a group have to get the average return, the group with lower transaction costs will do better.
....... "and the truth shall set you free" ... :)
A lot of folks harp on about the performance of the S&P as a reflection of the American economy, but what about the world as a whole? Any unifying perspective on future trends of the global economy as a whole that might guide buying international indexes?
Warren Buffet for President, the real Billionaire.
It would waste his time and he wouldn't want to be the leader of a Ponzi scheme.
@ken macdonald the problem is with the system that lets people abuse tax refunds. If they didn't have tax refunds taxes wouldn't be as high to make up for the loss and the irs wouldn't have such a high overhead saving more money for the government.
What about renaissance millennium fund?
I hope to god Buffett and Charlie have distilled their wisdom down to the next generation in their organisation and that this extremely unusual and radical common sense knowledge is passed on.
Is there a way to short hedge funds? We can buy S&P Index fund as a hedge and make money from the arbitrage over a longer period, because hedge funds will always lag Index (barring 1-2 year exceptional years).
Not only do hedge funds get 2/20, they get the capital interest loophole. So they pay capital gains tax rate on most of the money, even though they're NOT even risking their own money. That's obscene
Can anyone please tell me the website name which warren mentioned?
You can’t argue with this man. He’s Warren f’n Buffet.
Look at the S&P for 1999 - 2009 vs Hedge Funds.
Index funds are very good for investors with little insight. I have done it successfully. There are other reasons for investment advisers. Such as: What happens if you get Alzheimer or Dementia? What if you can not financially trust members of your family?
You can loose all your investments from actions of a corrupt caretaker. Happened to many.
Is there any reason to expect Berkshire-Hathaway to do any better than the market on average?
No, and Buffett has said as much
If everybody buys a s&p 500 index it won’t probably work. Warrem probably doesn’t remember that he charged 25% and paid 6% interest when he created the partnerships. Hedge Funds are competition for Buffett it will be much easier for him if they wouldn’t be around.
You are a liar.
What’s the name of the book?i didn’t catch it
I invest in ITOT total market index ETF. 3 basis points per year in fees...it's basically free. If you are ok with mutual funds, fidelity offers completely free total market funds now. Why would anyone pay a hedge fund manager??
Hedge funds and the S&P index are comparable. However, looking at the returns alone is a wrong way of comparing the two. It is possible that the index got a higher return because it's composed of more riskier stocks. Since hedge funds hedge away risks, then returns would tend to be lower as well but the returns should be higher relative to the amount of risk taken. There are proper ways to compare the two tho. Using ratios or measures that take into account the risks taken for a given return should do the job.
It's called a Sharpe Ratio. Even though the original idea of hedge funds was to hedge away risk, that is not how they function these days (largely because the fee structures incentivize more risk taking). Most "hedge" funds are much riskier and have lower Sharpe ratios than the S&P index or the Vanguard Total Stock Market Index Fund.
Seriously if you don’t have a finance masters, you shouldn’t be posting in a Buffett video.
So where does this clip put Ray Dalio?
But how do people find Ray in the oceans of options.
Charlie’s bifocals make it hard to tell if he’s
awake
Isn't this a bit misleading without accounting for risk? Is it possible the hedge fund risk was much lower than the index risk? Shouldn't we be looking at risk to return rather than just return?
I thought 7:12 was a bug on my phone😳.
Why isn't buffet comparing s&p with jim simmion's hedge fund ?
Food for thought.
Everyone gangsta until the math wizard arrives.
2020: many investors left or wanted to leave Jim Simmon's funds, his algo's did terrible, sold during the corona and hedged the recovery, double mistake by the algo's
@@rm1201 There are 2 funds managed by renaissance, one is for regular investors and one is locked for regular investors.
The one that is inferior experienced the drawdown, the medallion fund is still giving usual returns.
From what I understand, even though Simons returned more on average, his algos only worked for $10billion or less. Buffett manages an enormous amount hence is less flexible. Thats my amateur explanation.
Hedge funds make most of their profits by manipulating the stock market, not making great picks
These two column have report in the financial news.
Put option investment.
Hey guys from comment section it seems most of you guys are not sophsticated. Thats okay. Hedge Funds should not be compared to index funds because 1) portfolio weighting is different 2) they hedge their positions. Particular hedge fund strategy should be compared to its own benchmark - example stock equity arbitrage which creates alpha (excess returns) cannot be compared to risky equity index
Hedge funds shouldn't be compared with index funds? The whole point of investing is to make money, point blank. Sure, I get what you're saying. Say the goal in life is to own the fastest mode of transportation ever. If I own an airplane and my friend owns a bicycle, which are obviously not in the same category and will have different benchmarks. A fighter jet is going to be faster than a Cessna, but a Cessna is still going to be faster than any bicycle. Airplanes=index funds, bicycles=hedge funds.
Do you want any more comparisons?
I get what he's saying. Hedge funds and an index are comparable. However, looking at the returns alone is a wrong way of comparing the two. It is possible that the index got a higher return because it's composed of more riskier stocks. Since hedge funds hedge away risks, then returns would tend to be lower as well but the returns should be higher relative to the amount of risk taken. There are proper ways to compare the two tho. Using ratios or measures that take into account the risks taken for a given return should do the job.
@@JackAtPage I get what he's saying. Hedge funds and an index are comparable. However, looking at the returns alone is a wrong way of comparing the two. It is possible that the index got a higher return because it's composed of more riskier stocks. Since hedge funds hedge away risks, then returns would tend to be lower as well but the returns should be higher relative to the amount of risk taken. There are proper ways to compare the two tho. Using ratios or measures that take into account the risks taken for a given return should do the job.
@@gasparjuico9528 I see that perspective too. From a 25 year old investor and learning all I can from the best of long term investors, I see no reason to invest in hedge funds. I'm not the next Lynch or Buffett and have no expectations of being one.
I need to learn more about he hedge funds too I guess. That might have prevented this conversation haha
To assess the performance of a hedge fund manager (i.e. stock-picking for example, one must evaluate the information ratio of the manager)
The returns do not tell you the real story owing to the hard hurdle rate, high water marks, 2 &20 fee structure and other constructs in the fee structure that eat into the returns.
One of the best indicators for real performance for hedge (entirely my personal opinion) is the assets under management because the 2% is calculated of the assets under management so they must also ensure asset quality, since 2% is the operationally linked (loosely, working capital) which would be a good indicator of their short term going concern.
A red flag would be an asset and maturity mismatch ( financing long term obligations using short term financing) .this is a typical case of maturity mismatch that also exposes the fund to market risk and if their financing their foreign operations, throw in FX risk as well.
Moral of the story : Bond market > FX market > Stock market.
PS: I apologise for getting carried away.
The industries oversea has loss as well as chemical industries. As home future bad no income could be can not sale and export to oversea or by bad weather that cause farms damaging.
I look at this chart and ask: Why do people pay hedge fund managers?
RenTech disagrees