Wes Gray - “Even God Would Get Fired as an Active Investor” | #4
What if you had perfect foresight and knew ahead of time which stocks would be the best performers? The reality is even if you knew this and invested accordingly, you’d still suffer gut-wrenching drawdowns along the way so painful (around 75%) that “even God would get fired as an active investor” if he was managing other peoples’ money. That’s the result of one of Wes’s studies which he and Meb discuss.
Key Points
- Perfect foresight in investing, knowing exactly which stocks will succeed or fail, still results in significant drawdowns, demonstrating that even clairvoyant active managers could face substantial losses and potentially get fired by their clients.
- Combining value and momentum investment strategies can provide diversification benefits, but introducing factor timing – shifting allocations based on current valuations – may compromise the guaranteed diversification benefit for the potential of marginal extra returns.
- Managed futures, a trend-following approach applied to global markets, can serve as an effective diversifier for traditional portfolios, offering protection during market downturns when typical assets like bonds may not provide the expected diversification.
Resources: Alpha Architect’s new roboadvisor French Fama data Wes’ books Wes’ white papers “What the Marine Corps Taught Me About Investing” – Wes Gray “Even God Would Get Fired as an Active Investor” – Wes Gray “Want to Spot a True Value Investor? Look for Horrible Recent Performance” – Wes Gray “To Win with “Smart Beta” Ask if the Price is Right” – Rob Arnott “Why We Built an Active Roboadvisor and Why You Should Too” – Wes Gray CamelCamelCamel – Wes Nancy Silverton’s Pizza Recipe & CharityBuzz – Meb
Chapters
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| 38:54 | |
| 40:55 | |
| 43:19 |
Transcript
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