A Study of Your Returns

[SkyPilot]

Desperado,

Your explanations seem to be more dogmatic than scientific... this does not anticipate they are wrong, it is just a matter of your sincerely held belief.

To make a valid study using your methodology would likely involve taking random samples over an extended period which included both positive and negative markets. You would also need to include the same investors who are actively engaged.

What you have is a snapshot, not a study.

 

[Griffin]

Desperado, please understand why it is so important to use the appropriate type of statistical analysis.

Think about an Olympic race (any sport doesn't matter). The first person to cross the finish line is the "best in the world"... they will then be followed by a small pack of near peers and then a larger group of averages. When you use a linear regression to analyze a group like this, you are essentially saying that the chances are EXACTLY the same for the group to produce a stragler as they are to produce some super champion....and given the competiveness of the group, for that super champion to outperform their competors by two standard deviations, would mean they would have to far and away exceed the record set by the "best in the world"

This is why tailed statistics are used. Another example: filling soup cans at a factory. A machine fills soup cans at a factory and has some margin of error upon how close it gets to filling the cans to the top. After filling a million cans and measuring the airspace you come up with a distribution. Using linear regression and a bell curve you would expect a certain number of the cans to actually contain negative freespace....impossible, there's a limit or a "resistant measure of spread"

My point is.....if you actually go to publish that article, you need to remove everything you mentioned about statistics....because your statistical model is absolutely inappropriate, and in any court of law in this country, I could get an expert of statistics to confirm this.

Think about our group from this perspective - we have people who are outperforming all of the funds. It is impossible for any buy and hold strategy of any configuration to out perform those few individuals. Which means that one of us here on this MB is likely to be "the best in the world" at TSP investing. You have a tailed group.

And Griffin, perhaps you should brush off those old stats textbooks and perform a five number summary interquartile range analysis after adjusting the data for resistant measures of spread. I couldn't quite figure out how to get excel to do that. I suspect it wouldn't change the fundamental conclusions that can be drawn from this brief study, but if YOU would like to do the math, I'd be interested. I don't claim to be a statistical genius, but I'm wouldn't mind learning more.

Rokid, in a symmetrical distribution, you would expect 66% of returns to be within one standard deviation of the mean, or 33% more, and 33% less. You therefore expect 34% to be outside of that standard deviation. You expect 95% of people to be within two standard deviations of the mean, 47.5% above, and 47.5% below the mean. Therefore, in a normal, random distribution, 2.5% of returns should be more than 2 standard deviations above the mean. If jumping in and out of funds really worked, I would expect there to be more than 2.5% of people who are more than 2 standard deviations above the average return (however you choose to define that.) Since there are NONE, it can be implied that jumping in and out of funds actually decreases your returns. Naturally, with only 48 people in the study, that probably isn't statistically significant, but the trend is concerning. Try this site for more info on standard deviation:

 

[nnuut]

Go GET HIM Boys! :nuts: :nuts: :nuts:

 

[mlk_man]

It's people like this that have me longing for a prolonged bear market...............

 

[vic]

I like to buy and hold and do not like making 20 trades a month. But, when you see market conditions telling you to get out, it sure is thrilling when you do and the market takes a dive. It works the other way too. The other day I left the I fund a day early. That is not day trading. Dayu trading is almost impossible with TSP. I have done it with the I fund somewhat. Also they are ruling out the enjoyment of playing with your money. What ever floats your boat.

 

[mayday]

I like to buy and hold and do not like making 20 trades a month. But, when you see market conditions telling you to get out, it sure is thrilling when you do and the market takes a dive. It works the other way too. The other day I left the I fund a day early. That is not day trading. Dayu trading is almost impossible with TSP. I have done it with the I fund somewhat. Also they are ruling out the enjoyment of playing with your money. What ever floats your boat.

Are we playing here. I thought this was serious stuff. The consequences of a wrong move can hurt significantly. Thats why we do what we do here I aint playing and this aint Monopoly.

 

[SkyPilot]

Hey Vic! You said "Dayu" trading.
Sounds like trading martial art... I LIKE IT! :nuts:

also, Mayday,

it's serious, but it's fun, seriously fun...

the two aren't mutually exclusive.

 

[Birchtree]

Desparado you should listen to Mr. Pedantry. He does know a few things.

 

[Griffin]

Birch,

here's a link to pedant as defined by Wikpedia

http://en.wikipedia.org/wiki/Pedant

Please read the section on usage of the term - while it is certainly your intention to be insulting, this part of the statement "may gravitate to careers in academia or science where such obsessive attention to detail is often rewarded." fits me to a tee (my Army career is a part time job, when I'm not deployed). I would like to draw your attention to this part of the description "are prone to giving long detailed expositions". Sound familiar? breaking the message up over 20-30 posts a day does not dilute the excessiveness.

Feel free to use the site to study up on "Pompous Windbag"

 

[mlk_man]

I think I need to go to Traders Anonymous............:nuts:

 

[mlk_man]

Griffin, seems to me you're the one who has been initiating the confrontation lately. Please don't take your roll as a moderator lightly. You can always iggy Birchy just like anyone else can.

Thanks.

 

[Desperado]

Desperado,

What you have is a snapshot, not a study.

A valid criticism. But how would you like to find out that I'm right after 10 years?

 

[Birchtree]

Frankly Mr. Tendentious and Mr. Pedantry have become fortuitous rivals. Don't bring up the Army Mr. Buzz Cut because I have a 1954 Flat Top, OK.
The difference is in vision: mine is 6 months, 12 months and 18 months - yours appears to be 24 to 36 hours - so get over it. There is no rule on the number of posts any member can post. Sooner or later I'll have to offer you a pair of size ten shoes with attached 2x4 - they were left behind by DMA. Now my good man with good intentions you have only been posting for 8 months, hardly enough time to demonstrate any durability. And besides pedantry was offered as a compliment which you accepted - so get over yourself. We have another moderator who does a remarkable job and is pleasantly know as Harvey Keitel because he is always cleaning up our messes. It's time to lighten up - you go your way and I'll go mine. Hooah.

 

[Desperado]

Desperado, please understand why it is so important to use the appropriate type of statistical analysis.

.

Let's assume you are 100% correct and that those who outperformed the I fund (in fact, even those who underperformed it by, let's say up to 1%,) are talented traders. This would include 4 of you, or 8.3%. In an effort to "be like Mike," the other 44 people are rapidly trading their account, putting in a colossal effort to make sense of market noise, and yet, on average, underperforming a simple "know-nothing" 20% each portfolio. Using your frame of reference, the only explanation for this would be that they are lousy traders, who still need to learn how to do it. If one could just learn how to do it like Sugar N Spice, he would have awesome returns, one thinks. So these poor unfortunate folks spend years and years trying to figure out how to understand the markets and find that on average, after 10 or 15 years, for some reason, they are still underperforming. Look at the TSPTalk trading account. Here is someone who has dedicated a large portion of his life to understanding the markets and why they do what they do. He has been at this for literally decades. Yet his returns are well below an average buy and hold portfolio. Even if the returns of the top few are due to skill, this does not explain the fact that most of the returns are average at best. If you are going to conclude that Fundsurfer's returns are due to his skill, you must conclude that Tom's returns are due to anti-skill. I submit that neither is true and skill has very little to do with it.

In fact, given the advantages you have (can trade up until noon and no transaction costs) I would actually expect the average person to beat the know-nothing portfolio by a small amount. Yet we don't see this.

Keep on doing what you're doing. We'll study it again next year with more people. Let's see if Sugar N Spice, Fundsurfer etc are at the top of the list again next year.

Is it possible I'm wrong? Absolutely. If there were evidence that I had a good chance of getting an outstanding return by rapidly trading would I do it? Probably. If there is anything that could prove that rapid shifts in asset allocation work, it is this website. But thus far the data is not very supportive. Let's give it another year or two and see what happens.

 

[Griffin]

M_M,

I can ingore Birch, but I can't turn off Birch's impact.

How many good conversations have been brought to a halt mid-stream because he jumps in and attempts to steer every conversation towards the "super secular bull cycle" via some bloated, disjointed logic and a string of $5 words?

We will never know.

This is why you will see his name sit as the last post in multiple threads for hours at a time every day. He's like some "anti- E F Hutton" - when he speaks, people walk away.

 

[Birchtree]

Wrong, I make money the old fashioned way, I steal it. Pull your head out and look around. You are basically talking nonsense. You keep it up and I'll be forced to offer you the ultimate in Capital letters.

 

[Birchtree]

Desparado, sorry to pre-empt you, but in this case Griffin is correct. Now Griffin prove your case about unwanted interruptions with facts instead of surmising on emotion and speculation. I don't think you have credability on this particular issue - there must be a hidden agenda? Could it be Lotty-Dotty and chasing momentum? As I said before that is a strategy and not a criticism - I don't care how folks make their money.

 

[sugarandspice]

Desperado,

Can you honestly say you wrote this article unbiased and with no agenda?

No twisting or slanting of facts?

And it seems by the way it is written that it is posted elsewhere? Was it written for someone else?

And your apparent knowledge of HOW Sugar trades shows that you spend more time here than you would like us to believe. Why? Why not show your face when your here?

And one more thing for your benefit only, using Sugar in any way shape or form to prove or disprove anything your trying to say will only discredit your points.

....If one could just learn how to do it like Sugar N Spice, he would have awesome returns, one thinks.

Let's see if Sugar N Spice, Fundsurfer etc are at the top of the list again next year.

Gotta love Six Sigma!

 

[fabijo]

I can ingore Birch, but I can't turn off Birch's impact.

How many good conversations have been brought to a halt mid-stream because he jumps in and attempts to steer every conversation towards the "super secular bull cycle" via some bloated, disjointed logic and a string of $5 words?

Let's not lose another member! First, we lost the extreme bear, Technician. Now are we planning on losing the extreme bull? I understand needing a balance, but sometimes I find balance by reading the two extremes.

As far as impact... I have to admit that it is pretty exciting to imagine a market melt up. Of course I understand that will also mean a following melt down, while I wait in the G Fund.

 

[Birchtree]

Ferdinand has no plans to leave the lush green pastures, unless he is extended an invitation by The Boss. But there is no cause - the bull has remained polite without using profanity unless there is a verboten rule against $5 words and verbiage. What do you think $5 trillion in cash will create - a smooth transition or a stampede. It's coming. Snort.