Читать книгу Ignore the Hype - Brian Perry - Страница 23

The Change: Headlines often tout the massive short-term gains achieved by hedge funds and Wall Street traders. But you are not a hedge fund and probably aren't going to achieve such returns. And to be fair, even most hedge funds don't achieve massive success; after all, if huge returns were common, they wouldn't be newsworthy, and you wouldn't be hearing about it in the press.

In fact, each year a large number of smart, experienced, and talented hedge fund managers are forced to close their doors because they are unable to provide superior performance. As an example, Figure 1.2 shows the number of hedge funds that shut down over one recent four-year period.

These statistics obviously prompt the question: If hedge funds, with all their resources, struggle to succeed, what does it mean for the average Joe?

Figure 1.2 Hedge Fund Closures by Year

SOURCE: Analysis by Brian Perry. Information courtesy of Zero Hedge.

The answer of course, is that the struggles of the so-called smartest investors in the world provide further proof that “beating the market” is an incredibly difficult endeavor. Professionals, as well as amateurs, should carefully consider what inherent advantage they hold over their competition, and why it is that they are likely to succeed when so many others fail.

The Impact: Consider the resources available to a hedge fund, pension fund, sovereign wealth fund, or mutual fund while remembering that even with the plethora of tools at their disposal they still face a difficult path to success. Remember, too, that trading is a zero-sum game, and that for every winner there needs to be a loser. Now think of the resources you have available for trading – a home computer and access to the Internet, maybe conversations with your broker, or access to the market analysis tools on the online trading platform you use.

In a zero-sum game, where the competition is a trillion-dollar sovereign wealth fund or a trader at Goldman Sachs, is it realistic to expect consistently repeatable “victories”?

Success is possible of course. After all, David did slay Goliath, and the U.S. hockey team did beat Russia in the 1980 Olympics. But remember that the nickname for that epic victory is the Miracle on Ice, which should tell you pretty much everything you need to know about the long odds the U.S. team faced. To each his own, but I'd personally rather not have to rely on divine fate in my quest for financial independence.

Even if you are inclined to await Divine Providence, ask yourself this: If those two hockey teams had played 10 times, 20 times, or 100, how many matches would the United States have won? I don't know the precise answer to that question, but I do know that if the Americans were likely to win more often than not, the victory in Lake Placid wouldn't have been so memorable.

This is important because with very few exceptions the road to financial success requires repeated victories, as opposed to one shining moment. Because of that, whatever investment approach you choose needs to be repeatable, so that success can be replicated again and again over the course of years and decades.

And so, I repeat, what inherent advantage do you hold over Goldman Sachs or a large hedge fund, and is this inherent advantage something likely to lead to repeated victories?

You need to answer that question for yourself, but the key is to answer it as honestly as possible.

Personally, I'd rather avoid competing with the big guys and instead focus on strategies for success that don't rely on playing a zero-sum game. Better still, I want to utilize strategies that can be consistently applied in order to produce sustained success across years and decades.

Those strategies do exist. And if you have the discipline to stick with winning strategies and avoid the mistakes that doom many investors, you'll be well on your way to financial independence.