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Boris Marjanovic  

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  • A Simple Value Strategy That Kills The S&P 500 [View article]
    Investing Discipline,

    Keep running these backtests and publishing your findings. I am always looking for new ideas that can help improve my quantitative trading process. An article on the best long-term predictive signal would be interesting as well. Valuation is one of the best known long-term predictive signals, but there are others.
    May 29, 2015. 02:59 PM | 1 Like Like |Link to Comment
  • The No. 1 Stock In The World - Part 2 [View article]

    Completely agree. Most people sadly have no understanding of luck. The guy who said that "every person has to play the hand that he is dealt" is very ignorant. I would like to know what he thinks about the kids that were born in Syria and are now forced to go through a horrible civil war. I guess they should just "play the hand they are dealt," so if they don't succeed it's their fault (has nothing to do do with luck, according to him). Like I mentioned above, success = skill + a lot of good luck.
    May 29, 2015. 02:56 PM | 2 Likes Like |Link to Comment
  • The No. 1 Stock In The World - Part 2 [View article]

    Success = skill + luck. It's a simple equation. To say that "luck has nothing to do with XOM success" is very foolish. Every successful company, even if it is run by skilled management and makes good products, benefited from a lot of luck.

    Perhaps the luck factor is easiest to understand if we look at pharma companies. Literally every best selling drug in existence was discovered purely by accident. The most famous examples are Penicillin and Viagra. Non-pharma products are discovered in the same way. People tinker and experiment until they discover something (like a product) that could potentially be a success. It is only after the fact that people attribute these discoveries to "skill." In your profile you say you're a physicist. In that field too most of the great discoveries were made through trial and error. You keep experimenting (or in Einstein's case, day dreaming) until you find something that works. I'm sure you will know what I mean, even if others on Seeking Alpha don't.

    All I am trying to say is that luck plays an enormous factor in life. Now, I'm not saying that successful companies or individuals have no skill. I'm just saying that they have skill plus they benefited from a lot of luck. That's the main reason why I think it is dangerous to put too much money in any one stock. What if luck goes against you? What if a black swan event occurs wiping your portfolio out? You mentioned that "XOM makes a product that people use every day." So what? Enron and WorldCom provided services that people use every day and look what happened to them. This is why the safest thing one can do when it comes to investing is diversify and hedge against black swan events.
    May 29, 2015. 10:09 AM | 2 Likes Like |Link to Comment
  • The No. 1 Stock In The World - Part 2 [View article]

    "The only millionaire that I know got to be rich by investing in stocks. He never bought a single ETF or fund, he just picked individual stocks. His biggest holding for many years was XOM. He has owned stock in XOM for 50 years and will be dead before they ever go out of business."

    I know a lot of people who went bust using that same exact strategy. In this case, the main difference between the millionaire and the broke bum is dumb luck. On one hand, putting all of your eggs in one basket can make you rich (which automatically makes you look smart); on the other, it can put you in the poor house (which automatically makes you look stupid). Both individuals use the same strategy, one just happens to win the lottery. People tend to focus on the lucky winner, and completely ignore the unlucky loser. It's amazing to me how ignorant people are when it comes to things like this (even those on Seeking Alpha who are supposed to know better).

    Perhaps "the only millionaire" you know who got rich that way was the extremely lucky one! Ever think about that? If your concentrated investing strategy worked so well then perhaps you would know "more than one" millionaire! I know a lottery winner, too . . . but just like you, I only know of one (winning the lottery is not that common apparently -- it takes a lot of luck).
    May 28, 2015. 10:08 PM | 3 Likes Like |Link to Comment
  • The No. 1 Stock In The World - Part 2 [View article]
    Some of those companies might not even be around in 10 years. There is one universal fact -- every company that has ever existed and ever will exist has or will eventually go bankrupt (or, at best, close down operations). In life, nothing lasts forever. So putting all your money in one stock -- even a good stock -- for ten years is not wise. If I was forced to only buy one thing and hold it for a very long time, the safest option would be to buy an ETF (or index fund) that tracks the market.
    May 28, 2015. 08:47 PM | Likes Like |Link to Comment
  • Price-To-Earnings Is An Inferior Measure Of Value [View article]
    "The strategy does not buy a cheap stock and hold it forever - that is one of the common mistakes committed by Buffett wannabes."

    Holding a stock forever is not intelligent investing. Stocks are there to make you money. They're not your friends. You own them when they're cheap, sell them when they get expensive. I agree with you that a rules-based, systematic investment strategy is the way to go. This talk about "holding good companies forever" is complete nonsense . . . even Buffett doesn't do that. Almost every stock he bought during his long investing career he eventually sold . . . so much for holding stocks forever! Buffett is a smart guy and we can learn a lot from him, but some people take his words too literally.
    May 28, 2015. 08:33 PM | 3 Likes Like |Link to Comment
  • A Simple Value Strategy That Kills The S&P 500 [View article]
    This strategy can be made even simpler and better. First, quarterly rebalancing for strategies such as the one described above is not necessary. Annual rebalancing works just as well, and often times even better, because of lower trading costs and taxes. And second, instead of using "price" in the numerator of PTBV, using "enterprise value" would work better. EVTBV has been shown to provide slightly better risk adjusted returns in the long run. Hope that adds some value to this discussion.
    May 28, 2015. 08:18 PM | 3 Likes Like |Link to Comment
  • How Not To Beat The Market [View article]

    Try the barbell strategy I described in the article, it will be perfect for you.
    May 20, 2015. 12:51 PM | 1 Like Like |Link to Comment
  • How Not To Beat The Market [View article]

    Glad you enjoyed the article!
    May 20, 2015. 10:27 AM | 2 Likes Like |Link to Comment
  • How Not To Beat The Market [View article]
    "I know from my experience I have exhibited most of these at some time."

    Wish I could say I never made these mistakes but it would be a lie. But I definitely have learned from my mistakes (which is what matters).
    May 20, 2015. 10:26 AM | 1 Like Like |Link to Comment
  • How Not To Beat The Market [View article]

    I agree, the equally weighted RSP is much better than the cap-weighted SPY. I just used SPY (and the real S&P 500 index) as an example since there is data on it going back many decades. Actually, in this article I mention the benefits of buying the RSP:
    May 20, 2015. 10:21 AM | 2 Likes Like |Link to Comment
  • Beating The Market Is Simple, But Not Easy [View article]
    "After having played this game for 15 years, I've learned that the best investment strategy is just to keep it simple and automated. Have a few basic criteria you look at to make a decision and then just diversify. The less research the better, as most of the information out there is meaningless."

    Completely agree. Most information about companies is just meaningless noise. It's really only a couple of variables that matter (e.g., valuation) and it's easy to automate this process to look for such stocks.
    May 6, 2015. 12:58 PM | Likes Like |Link to Comment
  • Beating The Market Is Simple, But Not Easy [View article]
    Read my comment above. Over the long-term the S&P has outperformed.
    May 5, 2015. 02:39 PM | Likes Like |Link to Comment
  • Beating The Market Is Simple, But Not Easy [View article]
    "Winner: the market-cap weighted, less volatile, higher returning VUG."

    You need to stop posting false facts, my friend. First of all, we must compare ETFs with the same composition of I did with the S&P 500 ETFs. Sure, you can find a completely different ETF that had higher returns but it's like comparing apples and oranges -- makes no sense!

    Second, the VUG returned a cumulative total of 152% since it was introduced in January of 2004; the RSP returned, over this same time period, 179%. These numbers include dividends. Although I don't think we should be comparing these two ETFs with each other in this case, the evidence is still clear -- RPS comes out on top.

    And the final point I want to make relates to your false belief that equal weighting is more risky. You define risk, as a lot of finance academics do, as standard deviation (i.e., volatility). Anyone who, like myself, spent his life trying to understand risk knows that volatility is an awful proxy for risk. But let's go with it for now. Since inception, the VUGs Sharpe Ratio (i.e., risk adjusted return) was 0.40; RSPs Sharpe Ratio is 0.42. It looks like, even based on your own criteria, the RSP wins again.

    Next time back up your comments with real statistics if you want people to take you seriously.
    May 5, 2015. 02:24 PM | 2 Likes Like |Link to Comment
  • Beating The Market Is Simple, But Not Easy [View article]

    You're correct, people are missing the point of the article.
    May 3, 2015. 12:31 PM | Likes Like |Link to Comment