Data is Beautiful

I showed this to a friend and he was like "but without knowing what's happening in the world, it's a lot harder"

I said, "like insider trading?"

He said "no, no, other stuff."

The simulation is cute, but it's also heavily stacked in favor of buy-and-hold by

a) the selected timeline (from 1928 to 2019 the trajectory of the market was overwhelmingly upwards)

b) the limited timespan (only two years to play, so you never have enough time to glean information from the simulation)

And - most importantly

c) no additional information to make your decisions

You can't see the prevailing interest rates. You can't see p/e ratios. You can't see what the S&P is invested in at a given moment.

It's a rigged game, where "buy and hold" is always the optimal strategy.

Vary a, b, or c such that sitting on your money is optimal and you can "beat the couch" more often than not

Years ago, I managed a high-end restaurant. And twice a year a local brokerage firm would rent out the entire restaurant (to the tune of about $30,000) and treat their best clients for dinner.

I always asked the brokers what they invested their own money in. The answer was always the same, an index fund.

When you play the market, you are handicapping yourself with your trading costs, which as a small player will be high. After this, you are betting that you are smarter than the average dollar invested. This is a bad bet.

You could win, if you got the right hands. But the more trades you make, the more your results trend toward your average, and the more the information asymmetry hits. Do you actually know more about these trades than the industrial investors who do this for a living?

Isn't this essentially a lesson that the market goes up on average?

Of course you can't expect to beat the average trend with uninformed guesses. Do people actually trade like that?

You've been added to the Best of Lemmy: https://sh.itjust.works/post/65897371

As part of my econ degree, we did the math where you pick 20-30 stocks and bonds, toss 30 years of their returns into a matrix, sacrifice a falafel, and figure out the optimal portfolio.

The day we turned in the projects (it was too much math, but like I got the computer to do the linear algebra for me so it only took like 15 minutes. I think it was supposed to take a month or something but I needed enchiladas) we watched a 60 minutes or some other news clip abouta group of economists and a group of stock brokers having an investment competition. They would reach start with 10k of fake seed money, and they'd invest in a fake stock market. Whichever group had the higher average earnings/lowest loss at the end of I don't remember got bragging rights. The stock brokers all day traded, the economists all bought index funds and never touched their investments again. There were a few brokers who had huge earnings, but most of them lost big. All the economists had modest gains. Most of the brokers lost everything. The economists won. Which of course, he wouldn't have shown it to us, the economics department, if they'd lost.

ai generated graphic?

edit: entire website ai generated

The market is easy-hard to make money in.

Easy: pick index funds, put your money in, keep putting money in regularly. That’s it.

Hard: don’t fuck with it. Don’t touch it. Don’t try to time it. Don’t panic and sell if the market rolls back. Don’t listen to people trying to tell you how to get rich quick. Don’t let people manage your money, they’ll move shit around and incur fees and taxes.

That’s how you do it. Yeah, there are people who get lucky and pull a win out of their asses on individual stocks. They’re the exception, that’s why they stand out compared to 99% of the rest of investors. But to win long term? Just do the above.

Time to invest in a couch 🛋️

Don't make me tap the sign..

Past performance is not an indication of future returns

This applies to index funds too. An entire market that runs on index funds cannot function at all, and the more they dominate the more risky the outcome. Past stock markets do not indicate what will happen in future, the distribution is different.

These articles/games push a message to invest and don't think, it is not a good message

fun game and fun data but the entire site is ai generated, i think you should disclose that

Indexes are great, but S&P 500 is a US focused index. Would you have the same results if you picked an index based on Britain or Italy over the same time span?

I feel like that sort of thing is going to matter as China keeps rising while the US keeps shooting itself in the foot.

Stupid website was made by a goddamned clanker!

I somehow managed it on my first try!

Still won't try it with real money, but thought it was funny nonetheless.

I am a couch, apparently. I don't recall ever having sold anything I bought.

That's all well and good, but the experiment was done during a time unlike any other in market history with the idiotic growth levels that's been going on. Try it during most of the past 100 years when the market crashed for ran flat for years on end.

You should calculate portfolio Sharpe/Sortino ratios. Hedge funds for instance often also do not beat just buying an S&P500 ETF, but have less volatile returns (smaller drawdowns) because they go long on some stocks and short on others, which does better in a downturn.

So the top 10% of players is comparable to the top 10% of monkeys? Would the "Skilled" category not be lucky as well? I mean, a p-value of 10% is not great...