Can I Outperform The Market?
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- Опубліковано 20 тра 2024
- Factor investing is a well-documented way of beating markets over the long term. In this video, I look at a practical way to do this yourself using single stocks and show you the evidence that it has outperformed in UK and international stock markets. I’ll also update you on the performance of my own UK multi-factor portfolio built along these lines.
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Timestamps
00:00 Introduction
00:40 Beating The Market
02:22 Factors
06:15 Sector Diversification
10:05 Beating The UK Market
11:45 No Admin Portfolio System
14:30 My Factor Portfolio
15:42 International Markets
16:41 Rebalancing
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results.
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This affiliate link provides you with a special offer and we may also earn a small commission.
literally been looking at this for a couple of weeks, thank you so much!
My goal was 25%. We came close at 23.8%
5 months ago I invested $50K in the stocks market as my first dalliance into investing. Ofc they all took a 25% dip almost immediately. In my case my 50K went down to 44K. I just sighed, chalked it up to experience and then just left it all as it was. When I checked on the wallet a month ago it was worth $65K!!!
Now imagine if you dropped another $20K whilst the market dropped 📈🤑
hindsight is a biach, but I’m still investing of course and will do throughout! :(
Glad you held! It’s big returns… but it’s a tough game with stocks especially individual names.
Investing + buying in a dip = not going to do too bad lol.
I guess the question becomes what to invest in
Great video, Ramin. I'm a big fan of factor investing. It's nice to have a passive way of potentially outperforming the market through a factor fund, rather than relying on an active manager who usually underperform.
Of course nothing is guaranteed as you say and there's no guarantee these factors will outperform in the future, so you have to have some faith and be able to stick with it.
Stockopedia is also nice if you want to build your own factor portfolio.
Also, shoutout to the Tom's channel, def deserves much more views considering its responsible approach and quality.
@@massafelipe8063 cheers, Massa!
Which factor fund do you buy?
Very interesting mini study Ramin. A good illustration of actual value vs value based on market sentiment ( which I suspect many fund managers use to build generic portfolios ). Thanks for sharing !
Another excellent, useful video. Very useful information that one should be informed about. In spite of all this I have been hard pressed to beat the broader market index.
Nice one! Thanks for sharing your experience 👍
Thanks for watching! @SaadonAksah
Interesting, but I'll stick to picking 3 to 4 undervalued businesses and investing in those
It's misleading to compare performance Vs FTSE and ignore dividends
Actually exactly the opposite, the standard FTSE 100 index does not include reinvested dividends
@@finnwheatley2194 magnets upvoted 16 times. Ah, I remember financial literacy 🤣🤣🤣🤣🤣
Thanks for the transparency in showing your own portfolio performance, most UA-camr "gurus" rarely show anything.
You're welcome @deepmind3996
Great video & food for thought 👍
RE StockRank performance history, I wonder how has the back testing defined the constituent SupersStocks of each decile over the entire term?
E.g. is the 90-100 decile composition static and based on historical performance of stocks scored at 90+ today, or did Stockopedia have the historical data to include a stock when it hit 90, and exclude it when it dropped below 90?
Great informative and educational video. ❤
Glad you think so! @muntaserali7978
Investing in individual stocks can be a lucrative strategy, but it requires careful consideration and research.
13:31 The graph is misleading as it does not factor in the 'total return' of the FTSE All Share by including dividends.
Ramin..we all know how to beat the Market but very few of us have the guts to do it...and that is buy EQQQ or NESP, and keep buying and buying and buying and holding on... although net of fees, would this still outperform the S&p 500?
Factor tilting works over a very long time period, 15-20+ years is a significant time period for an individual investor's time horizon. I believe factor tilts are appropriate for institutional investors like endowments.
Yes, most people seem to think that long term means a couple of years
I have a couple of tilts after my mainly VWRL Investments . Including water , small cap & tec etf as I think these parts of the market will outperform over the long term
What happened to "past results does not guarantee future returns"?
Great video ! I wonder if a diversification and momentum mix well, as you would be limiting the positive impact of a trend, which tends to be sector specific (i.e. Energy in 2022, Tech(AI) in 2023)
This video is deep, but thanks for putting them out. It helps u correct from being an aimless missile in investing.
Great video Ramin- I’ve been a follower for a while. I’d love to hear your thoughts on emerging markets, and how active investors should consider investing in them!
Thank You.
You're welcome @DPTrainor1
Hi Ramin, instead of constructuing a small portfolio with these tilts, wouldn't it be simpler to buy 3 factor ETFs - value, momentum and small cap ETFs? thanks
No because then only 1/3 of your portfolio would have each tilt. So you wouldn’t get the effect of all three working together
Tremendous video. Thanks.
My skills are not at this level yet.
I have a small sum in Xtrackers MSCI World Quality Factor UCITS ETF . Historically it seems to do a lot better than my mainstay investment Vanguard Developed World. It would be great is you would do something on these ready made Factor Funds at some point.
For now, this has been time very well spent for me. Ta.
I hold that fund too, Kevin 😊
@@TomsPersonalFinance I got the idea from you.
Also the heads up on just ETFs. Which is so very handy.
Thank you :)
@@kevinu.k.7042 Cheers, Kevin. JustETF is super useful!
Thats the symbol XDEQ right ?
@@RajaseelanGaneswaran Hi, yes.
There is also IWFQ. They are very similar and when plotted together the lines track each other perfectly a lot of the time.
Would it be worthwhile putting say 1 or 2% into bitcoin? The asymmetric potential upside and finite scarce supply intrigues me
Very interesting video... Thanks Rami. I guess it would be useful to compare the back test of those stockepidia with actual passive funds combined for same region with same factors. So in that case, it may not be worth to enter in messy rebalancing (taxes/paperwork) and search... I also like to "search and learn" but sometimes people need only to adhere to some tilt (or not) by easily applying. For instance... To have bought Berkshire during decades, it has been a simple way to beat market by tilting to value. Still may be the case in long run.
Hi @ivivivir the passive funds I'd compare the NAPS strategy with would be the trackers of the FTSE All Share (since that's the universe of stocks the strategy is drawn from) but the returns would be similar to the FTSE All Share if that were the case. But you say a more interesting comparison would be with a UK fund with those tilts. However, as far as I know, there is no FTSE All Share fund with the same factor tilts as NAPS (value, quality, and momentum). UK factor funds are quite thin on the ground which is also why I made my own using Stockopedia (mine also has a small cap tilt). Thanks, Ramin.
Two things to note: you can tweak your own version of naps, like I have done and it varies from the documented results. You can do it against us companies too but the data costs more (assuming you are a uk native). The stockopedia founder compared against Nasdaq favourably I believe a while back but that’s not viewable externally (or may be still current).
My own naps is slightly behind in total return, over the worst two years, highlighting the variance of restriction. The video mentioned it but the recipe varied slightly over the period which makes the results a little skewed, but they’ve now reverted to the original recipe which was responsible for the early alpha.
It’s certainly a cheap exposure to factor investing now that vanguard closed their funds…
Buffet was originally a value investor like Benjamin Graham but now he is, arguably, a Quality investor. He now prefers getting a great company at a good price rather than a good company at a great price.
HI ramin... please could you share the name of the index fund which makes up 90% of your portfolio please 🙏
I am looking to make a small investment in my first index fund, nothing substantial just a very small amount for the experience and to help me learn just the basics of how investing in funds works and it would be great for me to see what you have invested in.
Im fully aware your not offering me financial advice and i wouod not treat it as such.
Great videos by the way ❤😊
What are your view on Dimensional Mutual Funds, which use tilt utilises a quantitative approach?
I think for small caps it is a better idea to choose a small caps actively managed fund instead with a great track record where the management is busy to cherry pick the ‘good’ small caps all day. Instead of a small caps index fund where there can be much more bad apples…
Hello there! Very interesting. Would you share that trading 212 pie with your community here?
The risk premium shifted to tech post Dotcom crash. Will that hold up? 🤷♂️
Hello, need some advice. I want to buy into the S&P 500 accumulated with Vanguard and I want to buy a fund for All world excluding the USA. How do I do that and what are your thoughts?
I would gladly invest 5-10% of my portfolio into Global Small Cap Value Index Fund. Just a shame there is no such fund, at least not for UK based investor. Great episode Ramin.
Thanks @pistopit7142
However, Vanguard Uk tried to run factor funds and failed miserably and withdrew from the market outside America completely in this are so perhaps this is a very high risk choice for ordinary investors?
They did not withdrew these funds due to higher risk for investors, they done it because majority of investors was not interested in buying them. Factor investing is really the only way to passivly beat the market in the long run, yet it is not very popular within retail investor. Big shame.
Probably not by stock picking... maybe with factor funds or leverage.
leverage is probably the most realiable. if you can get low enough interest margin. factors need to show if they are still there afte rbeing discovered. If believe so, but probably lower then in the past.
Stock picking will work in like 5% of cases, if ou are eithe rluck or a Warren Buffet. I would not bet on the latter part...
@stiffeification You might be right about the reliability of leverage vs factors. On Buffett, I read that his alpha disappears when you statistically control for Berkshire's exposure to known risk factors (e.g. value, profitability) and leverage (which he obtained through his insurance businesses). His genius was of course that he was factor investing intuitively before it was an established field within finance, but today his approach - and therefore his market beating potential - can be replicated systematically. Whether that will work as well in the future as in the past is another question.
I think you can with stock picking, if you do a lot of research and have a well defined strategy that you stick to no matter what. It's maybe statistically less likely, but if you're willing to put in the time and you're determined/patient enough to see it through for the long term and be willing to learn from any mistakes along the way, I think it definitely is possible. Most people just don't have the time, or are not willing to put in the time, to dedicate to it or are not willing to take on an amount of risk that it entails.
For most people index funds fit the bill, they have low risk and produce perfectly reasonable average consistent results without you having to do very much.
@Andygb78 thousands of hours of research by all global experts are reflected in the market price of a stock (maybe close to infinite hours now AI is on the case). How much time does one have to put into something to be able to make predictions that are more accurate than the smartest and most well informed participants in the field?
@@davec3974 You can actually use the experts to your advantage. If you look at which companies stocks have a large percentage of institutional investor shareholders, you can see the stocks that the majority of investment funds back themselves.
Peter Lynch describes the advantages a non financial expert has over a professional, and it basically boils down to speciality. There are companies that you will be more familiar with as a customer than a global expert could ever hope to be, because you've literally spent hundreds of hours engaged with that company, a finance professional has a limited amount of time to analyse a company and does so by a rigid theoretical metric.
An understanding of the broad fundamental investing principles, combined with a real world appreciation for industry/global/consumer trends coupled with discipline and patience is all you really need.
That’s really interesting…just wondered about tax. Is it possible to implement a naps portfolio in a trading 212 ISA with individual stocks. I don’t know why but I was sort of under the impression that you couldn’t buy single stocks in an ISA. 🤷♂️
You can buy single stocks in a isa
Hi Ramin. There's SPDR MSCI USA small cap value weighted ETF. What do you think about it?
Is this something UK based investor can buy within ISA or SIPP? If not then it has not much use for most UK investors.
Is this something UK based investor can buy within ISA or SIPP? If not then it has not much use for most UK investors.
@@pistopit7142 I don't know. They are UCITS ETFs. I'm not a UK citizen so I can't check.
because the strategy has worked in the past doesn't mean it will work in the future, and you need to stick to the strategy regardless of whether it is performing well because *maybe* it will in the long term.
or maybe not. maybe you ride your portfolio all the way into the ground by sticking to a strategy that no longer works.
Thanks for the video. Your 2.8% versus my 4% in a savings account felt good. I've lost money on stocks during 2022. 2023 was slightly better but super tricky. 2024 is like: WHERE do I put my money.
Fewer new automobiles have been selling in recent years than the 2015,16,17,18 era. And cars are including more and more microchips. And EVs use more microchips than gas cars.
So I’m no financial advisor, but I expect that in three years we’ll almost certainly be selling more new vehicles, with, for two separate reasons, a greater number of microchips per vehicle. So following the selloff in their share prices since mid 2023, Im putting money into companies that make microchips that are used in vehicles. It’s a bet on EVs that doesn’t even need EVs to succeed in order to be successful. Growth trends on top of growth trends without getting caught up in the high valuations of AI hype companies
Silicon carbide chips. ON, ALGM, STM etc
The best investment style for investors outside the system is dollar cost averaging in index fund. The reason is that some people in the system have more information. When we, as outsiders, reach information, it is too late. As Maddoff said, the whole system is a ponzi scheme.DCA is in S&P lower your stress level as well as your costs.
Yes, agree with that. I have only really made money on tech stocks. UK stocks have been a disaster, mostly.
I don’t think 10 year back test is nearly long enough.
I have been on this channel for over two years now, but it hardly talks about pensions 😅
You mentioned 90% of your portfolio is invested in a global equity tracker. in other videos you had mentioned your were invested in a developed world tracker.
Are you invested in a global tracker or developed world tracker?
See 13:50 onwards of his video entitled “Vanguard UK Release New Fund & Why I’ve Changed My Portfolio” published on 2 December 2023.
@@JLL12345 yes, now he is in Developed world ETF. But it can not be called a global tracker as he says in todays video
He's currently invested in Vanguard VHVG as far as I know and I watch virtually all his videos
@@shahraxit often "global" is used for developed world funds and "all world" is used for funds that include both developed and emerging markets.
@@shahraxit It’s just semantics; I wouldn’t worry about it. He’s very open with precisely what fund he holds and gives out the ticker. 👍🏻
Only up 2.8%!! That's pathetic. My stocks are up over 10% since October. The market has access to all the information in Stokopedia. So it's all priced in.
Sure, but it may help avoid total turkeys
I'm not convinced
You did a vid on factor investing two years ago. Why haven't you shown in this what results you've had since that time? Two years could be a short timeframe over which to expect factor investing to show a marked outperformance, and yet the past 2 years might well have illustrated the sorts of trends which factor investing is intended to manifest. The fact that you deliberately choose here not to allude to your own recent adventures in this area speaks volumes, unfortunately. Or maybe you never followed up your own conclusions. Which would again speak volumes.
Too complicated for me, simple is best 😃
Sounds simmilar to magic formula.
I follow the Magic Formula and document it quarterly. 3 years and counting!
You can beat the market, but "you" can't.
I beat the market by 150% in 2023 with rolls royce 🎉
gains, what are you doing with your gains?
@mccready7479 I am expecting more from Rolls royce in 2024, so I am sitting tight at the moment. I think dividends will be reintroduced at some point.
Factor investing. Small cap, value, quality, momentum, yield, volatility etc. Doesn't that just cover all stock types anyway?! Choose any stock and they will probably be one of these?
Not really. It's about tilting towards those types of stocks relative to the overall market.
@@emelpolat4762 I see what you're saying, but these factors encompass everything in the market, I.e they don't seem unique. So essentially what I'm saying is what are these factors avoiding from the market because all these describe 100% of the market anyway. Choose any stock and you could assign it to one of those factors, so why would it outperform.
@nb-ii2rb because they don't describe 100% of the market. Factor investing is generally focused on far fewer companies than the overall market. They might look at the top 10% or 20% of value companies for example, depending on methodology. If you pick a multi factor fund, the factors are generally stacked on top of each other (rather than picking the top 10% of value and the top 10% of small caps for example, they would filter by both value and size and pick the top 10% of that).
This reads to me more like a marketing piece, rather than educational content, unfortunately.
Growth ETFs.. (Xlkq)