Stock picking in a crash is simply playing the lottery and has little to do with a long-term investment....
ETFs are the safer option. Because there are enough crashes that cannot be recovered locally for years.
ETFs are the safer option. Because there are enough crashes that cannot be recovered locally for years.
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5Mon
@Madhatter5566 Is this simply a gross aversion to stock picking or is there a specific statement in it?
So do you see a concrete difference for stock picking in a bull market vs. a bear market?
So do you see a concrete difference for stock picking in a bull market vs. a bear market?
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@Soprano In general, but more so in a crash. ETFs or indexes have a positive expected return. Equities only to a limited extent. Directional bets that are time-dependent. At some point, 95% of all shares lose out to newer ones.
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5Mon
@Madhatter5566 Well, but what is an index other than an arbitrary composition of shares? Why should the composition determined by Dow & Jones be better than that of uhh Dirk Müller?
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@Soprano Experience values. Statistics. Nen World has a positive expected return, Dirk Müller has no idea. That also depends on the mechanisms of the World.
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4Mon
@Madhatter5566 But what do you mean by that? All non-inflationary assets have a statistically positive expected return. Equities, gold, real estate, bonds ... this is not exclusive to the MSCI World.
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@Soprano In my opinion, this statement is precisely wrong. Shares do not have a positive expected return, indexes do. Indexes throw out loser stocks and take in winner stocks. With the method, there is the expectation of making a statistically verifiable profit with an index. Across thousands of shares, with companies that come in and losers that go out. Stocks on the other hand=? I don't know that anyone leans so far out that any stock has any expectation. Companies tend to go bust at some point or not do so well.
If you look at it historically, 95% of the top stocks lose their status over time. At least that's how I know it.... Nasdaq.... If you had bought and held all the top stocks 30 years ago, 95% of them would now be lousy, while the index has grown happily.
Same thing in a crash: The companies in an ETF World before the crash are not the same stocks after a crash that allow the ETF World to "recover". At least not necessarily.
If you look at it historically, 95% of the top stocks lose their status over time. At least that's how I know it.... Nasdaq.... If you had bought and held all the top stocks 30 years ago, 95% of them would now be lousy, while the index has grown happily.
Same thing in a crash: The companies in an ETF World before the crash are not the same stocks after a crash that allow the ETF World to "recover". At least not necessarily.
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4Mon
@Madhatter5566 You can put it even more drastically. If I had bought the Dow Jones 150 years ago ... I don't even think there are any more shares in it today, apart from General Electric. But not necessarily because they all went bankrupt.
Most companies were simply taken over or merged at some point over the decades. Instead of US Rubber, you would have Michelin . Instead of US Tabacco, you would have British American Tabacco. Instead of Cotton Oil, you would have had Unilever.
So although there is nothing left of the shares from the original DJI, you would have automatically received new shares. But actually, no company has simply disappeared without a trace and dematerialized.
That would be an exciting topic for a doctoral thesis or for a quantum computer to work out whether it would have been better to buy the "current DJI" over 100 years or to hold the companies for decades and see which successor shares you get after the takeover.
Most companies were simply taken over or merged at some point over the decades. Instead of US Rubber, you would have Michelin . Instead of US Tabacco, you would have British American Tabacco. Instead of Cotton Oil, you would have had Unilever.
So although there is nothing left of the shares from the original DJI, you would have automatically received new shares. But actually, no company has simply disappeared without a trace and dematerialized.
That would be an exciting topic for a doctoral thesis or for a quantum computer to work out whether it would have been better to buy the "current DJI" over 100 years or to hold the companies for decades and see which successor shares you get after the takeover.
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@Soprano If a company goes bankrupt, you don't get just any other company. Instead, you lose your share of the company or it is worth nothing. Has nobody told you that yet?
And I wanted to show you the obvious difference between index and single-stock picking. But probably too high.... Too bad.
And I wanted to show you the obvious difference between index and single-stock picking. But probably too high.... Too bad.
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4Mon
@Madhatter5566 But none of them went bankrupt. You are overestimating how many listed companies supposedly go bust. Many companies do disappear from the stock exchange every year, but NOT because they are insolvent and unable to pay and are then wound up, that is an absolute rarity and exception.
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@Soprano But they disappear into oblivion... Again. The top 100 30 years ago are now only 5 or 7 companies in the top 100. Indexes have expected returns in the future. Equities do not.
Stock picking for the long term means accumulating losers. But ok. How do I explain this to someone who thinks that if a company goes bankrupt you get shares in another company...
Stock picking for the long term means accumulating losers. But ok. How do I explain this to someone who thinks that if a company goes bankrupt you get shares in another company...
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