This (traditional value investing aka Benjamin Graham /Buffett 95%of Wall Street, is a 20th century winner but not a 21st century winner) is precisely the conclusions I have come to from my own observations over the past few years.
Very insightful as always. Active fund managers and PMS are outdated. Go for passive Index investing and keep looking for the big dips in the markets that happen during black Swan events like in 2008 financial crisis and the Covid induced March 2020 meltdown.
Deeply destructive of price discovery, exactly the activity upon which passive investing depends. Put another way, passive investing is parasitical and adds no information to markets.
Of course most hedge funds are fancy hustles as you are paying them to produce negative expected value compared to a reasonable passive benchmark. There have been exceptions with clear worthwhile edges against the market after fees, such as Thorpe's old fund that he closed when his warrant vs stock edge closed, and the long running and fabled Medallion fund-- and possibly Druckenmiller.
The only reason the hedge funds in the US haven't gone out of business yet is that the bulk of the pension funds and endowments have historically invested with them. The sooner this situation changes, the sooner they will face their d-day. It's just easier for the pension funds and all the major endowments to invest with a major PE firm or a hedge fund with whom they've been invested for decades than to cherry-pick Vanguard ETF's and overhaul their investment strategy and their framework for investing.
In the long run, the market is a weighting machine but in the short term , its turn out to be a voting machine! Last but not least, never under estimate the power of compounding!👍🏼👍🏼👍🏼
Please check past data comparison between index returns and active fund returns in India. The active mutual fund manager has several limitations under risk management. Index is free from all such restictions.
What is the difference between an active manager and an actively managed ETF. Are these the same individuals. Does the same principle that this gentleman talk about apply to actively managed exchange traded funds or just active portfolio managers
I feel more data can often be gathering data and interpreting it to suit your inclination and not objective. Secondly I feel from your talk it's Luck, network and then only skill counts.
My views are different. At least for a developing economies like India, there is plenty of scope for active fund manager to outperform the benchmark index. 2020 and 2021 so far may be aberration. Not discerning to generlise for all economies and times.
I disagree based on personal experience. Money invested and held in MFs for close to or more than a decade did poorly than buying and holding ETFs. This holds true for both one-off as well as SIP investments. Further, having invested via an actively managed portfolio service, I have seen poorer returns versus passively buying Nifty ETF consistently on a periodic basis. Lastly, both MFs and actively managed portfolio services have costly cost structures that erodes into my gains.
You pay a cost believe me, it’s just done differently, less transparent. E.g. they sell your transaction data ahead of processing, so maybe we all pay more than in the past,
You still pay a sort of fee on less liquid stocks because they'll have a larger spread. This is especially true if you're a fund and you want to buy millions of dollars worth of stock: buying one day and selling the next will lose you several % even if the price doesn't really change due to the spread and the shallow order book.
Having invested money is actively managed portfolio and also in stock passively (buying ETFs/pool of stocks on a monthly Systemic Investment Plan), my returns from the latter have significantly beaten (~30%) the former. There is more power in slow and steady wins the race. Active investing constantly chops and changes thereby missing out on time value of money, i.e., letting money grow steadily. In addition, each and every change has a cost attached to it (going back to the complex and expensive cost structures), thereby driving returns lower. My personal experience validates what Prof. Damodaran says.
You do yourself a disservice mentioning Jim Simons: Obviously Medallion fund has enjoyed a large edge with their unique techniques, over a zillion short term trades, on a capped amount of money, going back over 20 years. But, yes... you know this topic well, and make many valid and extremely important points.
To be fair Simons doesn't even consider the Medallion fund to be a part of the industry per se, they bought everybody out a long time ago, and they've been managing their own capital ever since. It's more of an ongoing experiment than a traditional hedge fund/investment vehicle.
@@jamesstmanhattan True the only investors are now the employees and Simons. Not true this is an experiment. The fund has averaged over 63 percent s year before fees for over twenty years with only one small losing year. The fund is capped at ten billion, up from six billion a number of years ago. Medallion simply can not find enough edges for a larger capital base. The fund has an incredibly high turnover with it's positions usually lasting only days: Very large sample in all kinds of markets while continuing to best today's tougher competition.
One of the best video interviews I have ever seen in my Life (and I am an Active Investor since 2018) But now, even having beaten the market, I still thinking that I have so much to improve in "my system" and yes maybe I just got lucky.... Thank you for the huge value of knowledge you have shared in this interview. PS: Im a new Sub!
Aswath Damodaran . " Where 's your edge. "
" Tell me what you can do differently ."
This (traditional value investing aka Benjamin Graham /Buffett 95%of Wall Street, is a 20th century winner but not a 21st century winner) is precisely the conclusions I have come to from my own observations over the past few years.
I would love to see a discussion between Aswath and Chamath Palihapitiya..... Their views intersect on various topics.....
Yes
+1
chascam spac lol?
@@forsupernovae2401😂
I can keep listening to prof. Aswath forever... such a clear thought
No smart money is as smart as educating yourself on fundamentals, macroeconomics, and technical analysis then thinking for yourself.
technical analysis is bullshit
@@mungermid Still can't avoid it cos the idiots follow it and the idiots are basically 80% of retail investors!
Very insightful as always. Active fund managers and PMS are outdated. Go for passive Index investing and keep looking for the big dips in the markets that happen during black Swan events like in 2008 financial crisis and the Covid induced March 2020 meltdown.
Those big dips comes once in one decade ...
What would be an example of index investing? I am unable to understand what is meant by Indexes beating active money management mean
@@venstomon931 and you have day or 2 to pull all your resources .
Deeply destructive of price discovery, exactly the activity upon which passive investing depends. Put another way, passive investing is parasitical and adds no information to markets.
But who was holding cash when that happened?
I am a big fan of Professor Damodaran
always a great advice and lessons from prof. Damodaran
Mentally stimulating talk, prof. Commenting after pulling my money out of Mutual funds.
Why would you do that my guy? Where's the sense in that?
great lessons from Prof Aswath Sir, Many thanks for this session and video
August 6/23
Thank You for this !
Cheers from Vancouver Canada
Of course most hedge funds are fancy hustles as you are paying them to produce negative expected value compared to a reasonable passive benchmark.
There have been exceptions with clear worthwhile edges against the market after fees, such as Thorpe's old fund that he closed when his warrant vs stock edge closed, and the long running and fabled Medallion fund-- and possibly Druckenmiller.
The only reason the hedge funds in the US haven't gone out of business yet is that the bulk of the pension funds and endowments have historically invested with them.
The sooner this situation changes, the sooner they will face their d-day.
It's just easier for the pension funds and all the major endowments to invest with a major PE firm or a hedge fund with whom they've been invested for decades than to cherry-pick Vanguard ETF's and overhaul their investment strategy and their framework for investing.
Thank you Professor Damodaran!
This is really good 👍 👏 I like how he called out Buffett
He was low-key calling Dalio out for the whole 40 minutes without explicitly calling Dalio out
In the long run, the market is a weighting machine but in the short term , its turn out to be a voting machine! Last but not least, never under estimate the power of compounding!👍🏼👍🏼👍🏼
great video. thanks!
Professor Damodaran should probably post a short video on how his name should be pronounced. Never seen a host who can get his name right.
4 syllables - how hard is it
@Arun Nair Isn't he a Tamilian?
@Arun Nair thanks for this explanation. I am from Germany and it is not so obvious
Sri Damodaran thoughts on the crises after one year has come true... great listening to the video
Please check past data comparison between index returns and active fund returns in India. The active mutual fund manager has several limitations under risk management. Index is free from all such restictions.
At around 6:28 in the video he mentions an author and a good friend of his. Anyone catch that name?
Very Good session...... Needed a star like you to bust the myths we retail suffer from
What is the difference between an active manager and an actively managed ETF. Are these the same individuals. Does the same principle that this gentleman talk about apply to actively managed exchange traded funds or just active portfolio managers
Damodaran looks great for his age, should have asked what his diet is in the Q&A
This man is most underrated person.
ASWATH DAMODARAN .." You can admire people and disagree with them. DON'T PUT THEM ON A PEDESTAL ...."
was this interview done in late 2020? but uploaded in late 2021?
I feel more data can often be gathering data and interpreting it to suit your inclination and not objective. Secondly I feel from your talk it's Luck, network and then only skill counts.
Aswath mentions his favorite author at 6:28 period of the webinar , Can any one catch the last name of the author he mentions ?
Michael Mauboussin
The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing - Michael J. Mauboussin
I suspect this video was recorded around the summer of 2020.
Very insightful lecture.
Thx.. For all your free bibles....
An eye opener
Just commenting for UA-cam algorithm to promote it. Great content 👍
Thank you Aswath
My biggest strength is able to frequently tune into MSNBC investing talking heads and watch them as comedies.
thanks for the video
Humility is the only talent required for investing....
Is it possible that active investors exit early rather than ride the positive wave as opposed to index values?
Does anyone know which book does he specifically referring to? (6:30)
The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing - Michael J. Mauboussin
Charles Ellis ‚Winning the Looser‘s Game‘
Great talk but people would always like to find an active manager who does better than index funds.
Priceless!!!!!
Slides ?
music to my ears
What is the book he mentioned for Mike Mabuse ?
The Success Equation: Untangling Skill and Luck in Business, Sports, and Investing - Michael J. Mauboussin
He‘s soo full of wisdom!
Prof, how about PEs and VCs performances ?
so basically just invest in spy n leave it alone?
My views are different. At least for a developing economies like India, there is plenty of scope for active fund manager to outperform the benchmark index. 2020 and 2021 so far may be aberration. Not discerning to generlise for all economies and times.
I disagree based on personal experience. Money invested and held in MFs for close to or more than a decade did poorly than buying and holding ETFs. This holds true for both one-off as well as SIP investments. Further, having invested via an actively managed portfolio service, I have seen poorer returns versus passively buying Nifty ETF consistently on a periodic basis. Lastly, both MFs and actively managed portfolio services have costly cost structures that erodes into my gains.
@@YA291990 no comments,
Prof. Damodaran is the definition of being data-driven.
oh boy, the last vestiges of EMT are still clinging strong I see
Aswath Damodaran .." I don't know. "
Wow..!
Is the transactions cost still relevant? Zero commission trading is a thing now lol.
Right
You pay a cost believe me, it’s just done differently, less transparent. E.g. they sell your transaction data ahead of processing, so maybe we all pay more than in the past,
You still pay a sort of fee on less liquid stocks because they'll have a larger spread. This is especially true if you're a fund and you want to buy millions of dollars worth of stock: buying one day and selling the next will lose you several % even if the price doesn't really change due to the spread and the shallow order book.
50-50
Efforts- luck
Having invested money is actively managed portfolio and also in stock passively (buying ETFs/pool of stocks on a monthly Systemic Investment Plan), my returns from the latter have significantly beaten (~30%) the former.
There is more power in slow and steady wins the race. Active investing constantly chops and changes thereby missing out on time value of money, i.e., letting money grow steadily. In addition, each and every change has a cost attached to it (going back to the complex and expensive cost structures), thereby driving returns lower. My personal experience validates what Prof. Damodaran says.
Delete your comment before the Bridgewater guys see it!
Very good fundamental with date. See his homepage.
Every gambler only tells you the story when they won in the casino.
What's the net worth of the speaker? Has he been a successful investor?
If you had listened to the presentation, you would realize how stupid it is to ask that.
Brilliant!
ASWATH DAMODARAN .." Read less, Think more. "
buy on drops or pay debt .
If Damodaran is so knowledgeable, then why he could not make Billions
Knowledge alone cannot make you billionaire need to take action and take the risk and risk come with profit and loss
@@anwarnayani5849 agreed
He is probably not motivated by excess money like most people assume we all are.
He is probably not motivated by excess money like most people assume we all are.
@@TheLynx8888 Then Why does he still invest ???
👌
You do yourself a disservice mentioning Jim Simons:
Obviously Medallion fund has enjoyed a large edge with their unique techniques, over a zillion short term trades, on a capped amount of money, going back over 20 years.
But, yes... you know this topic well, and make many valid and extremely important points.
To be fair Simons doesn't even consider the Medallion fund to be a part of the industry per se, they bought everybody out a long time ago, and they've been managing their own capital ever since.
It's more of an ongoing experiment than a traditional hedge fund/investment vehicle.
@@jamesstmanhattan True the only investors are now the employees and Simons.
Not true this is an experiment.
The fund has averaged over 63 percent s year before fees for over twenty years with only one small losing year.
The fund is capped at ten billion, up from six billion a number of years ago. Medallion simply can not find enough edges for a larger capital base.
The fund has an incredibly high turnover with it's positions usually lasting only days: Very large sample in all kinds of markets while continuing to best today's tougher competition.
Agreed. Humility is incredibly important in investing. Intelligence matters too though arrogance can cause intelligence to become folly.
Ray Dalio's punching the air watching this
haha why is that?
@@breezytea4973 Because people might (and many will) eventually stop investing with hedge funds.
Ek Sri Lankan aur ek Madrasi ki kya khoob jodi hai!
Padosi hain dono.
It is so obvious and cliched that a Sri Lankan is taking interview of The Madrasi Valuation Anna - Both are neighbors of each other!
I guess El Erian is arrogant
He is a fucking gangster
Aswath is not exactly humble sounding himself. he knows important stuff for sure.
Hindi main Bol ke dikha Tab Manunga
One of the best video interviews I have ever seen in my Life (and I am an Active Investor since 2018) But now, even having beaten the market, I still thinking that I have so much to improve in "my system" and yes maybe I just got lucky....
Thank you for the huge value of knowledge you have shared in this interview.
PS: Im a new Sub!