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The Six Secrets To Beating The Market

FYI: Every investor, in their heart of hearts, wants to find the “secret” to beating the market.

In theory, it’s a fool’s errand. Markets are efficient, we’re told. That means there should be no “secret”. It should not be possible for a given strategy to beat the market consistently over the long run. As soon as any secret is uncovered, it should instantly be arbitraged away by a swarm of profit-seeking investors.


  • Hey folks this is a pretty good read. The six are as follows: 1) Trend Following 2) Momentum 3) Seasonality 4) Carry 5) Betting Against Beta and 6) Value.
  • Only one I mostly follow, patience and high quality.
  • edited February 2019
    Just my opinion, but the secret to beating the S&P over the long term is that there is no secret. It varies from one investor or trader to another. However, I do agree on the importance of momentum. At least in the trading world that is heads above all other factors. In the end though, what really separates the winners from the losers are psychological factors, not technical factors. Then again, there is the role of luck. But that is a topic for another time.
  • edited February 2019
    huh, no mention of the 'value' auto-churn strategy for SP500 that, so far as I can see, outperforms at every interval for the last ~6.5y

    iow a non-secret for beating the market, or #7

    graph CAPE vs FXAIX since fall of 2012 and any sub-period thereafter
  • edited March 2019
    It's almost impossible to beat market over 10 20 yrs long... Even great MFs can't do it the odds are heavily stack against you that's why it maybe prudent to have good ETFs and good MF that had long reasonable term records... Just my 2 cents

    Maybe Buffett was able to do few yrs previously but can't tell if trend would continues
  • @jN,
    The widely acknowledged great MFs that have beaten the market over 20y is something you might find interesting to study. The opposite of impossible.
  • edited March 2019
    Related. Think Ted post this article last yr

    Most mf have 1 2% annual fees will put large dink in long term returns - long term superior returns may not be possible
  • Almost everyone can run a screen that can beet the market looking backwards. Can anyone you tell me how many of them will beat the market in the next 5 years or even 3 years?

    Often money managers that had great records with small amounts of money under management struggle with popularity rises and more assets flow in. Other manager take note as well. They analyze the investments and strategy of the manager and try to replicate the success and suddenly too many fishers are fishing in the same pond and alpha is gone.

    You know there are incubation funds as well. Fund companies incubate funds for 3 or 5 years and if they are successful they are opened to bigger public. So, the previous record is incorporated to the fund that almost never benefited it. There are a lot of tricks the fund industry is playing to show alpha but rearview investing can take so much. Future is uncertain as ever.
  • Too easy a charge to make. There were puhlenty of mainstream articles from 20+ years ago, and older, saying that 'here are 5 (or whatever) consistently excellent funds that appear poised to do well over the longterm future'. DODGX, FCNTX, FLPSX, TRBCX, and surely some from Vanguard. And others, but those are in memory. I know because I already owned some and followed their coverage, and w/ OCD about it (then, less so now) was always on the lookout for future adds.
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