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Principles by Ray Dalio

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  • #16





    Every once in awhile, the news runs a story about the latest lottery winner.  Those folks get a pretty big check, even after the various levels of taxation. Should more people play the lottery? 
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    Yes I understand the lottery point. Reason I’m using Ray and Bridgewater as an example is because their success is far from luck. It’s consistent and based in analysis and reasoning to where investing decisions are made by a computer algorithm they built from scratch. Fortune 500 companies and entire countries are confident enough in it to give them their money.
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    Lots of pensions and important people gave Madoff money as well, means little.

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    • #17
      @zaphod I frankly don't know enough about the other successful investors of the era to counter you with reason, and what you say is very convincing and makes a lot of sense. Yes of course his principles aren't necessary to be successful in investing, I just think his principles have contributed to his investing success in a way unique to him and his company, because its so fundamental to their success. Perhaps everything he explains about how he built his company and how he actively manages is hodgepodge and it was luck of the draw. I think more likely its a combination of the two.

      Returning to the bigger picture, are you saying it's really not worth looking to investing firms and other managers to beat the market because there is still a strong "luck" component that doesn't make it much better than index funds, regardless of their previous success?

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      • #18


        I was more interested in how he ran his business (culture, philosophy, operations, family involvement) than I was in his investing processes and acumen.
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        I'm curious what you thought @vagabondmd. What resonated with you the most?

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        • #19




          @zaphod I frankly don’t know enough about the other successful investors of the era to counter you with reason, and what you say is very convincing and makes a lot of sense. Yes of course his principles aren’t necessary to be successful in investing, I just think his principles have contributed to his investing success in a way unique to him and his company, because its so fundamental to their success. Perhaps everything he explains about how he built his company and how he actively manages is hodgepodge and it was luck of the draw. I think more likely its a combination of the two.

          Returning to the bigger picture, are you saying it’s really not worth looking to investing firms and other managers to beat the market because there is still a strong “luck” component that doesn’t make it much better than index funds, regardless of their previous success?
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          I think that is very true, for him personally.

          Well sometimes yes and sometimes no. Unless you really know the firm and people, or have decades of history you're basically going on faith. All the big fancy known awesome hedge funds cant be invested in anymore, so although they exist everyone is locked out. For other people you'll have a shorter track record that will be indistinguishable from luck and may fizzle out, its a real crap shoot. There are a couple of people/funds I would give money to, but I know them and their strategies fairly well and they are very very specific types of funds that should not rely fully on some uncanny ability to do well, just manage/size risk appropriately and not get greedy.

          I dont think theres anything wrong with trying your hand with active management. Make it a small enough proportion of your portfolio that the fees dont really drag down overall performance. The real issues with active management as mentioned are the fees with this crap shoot faith thing. The amount of alpha in a stock strategy is small, so small that indexing gives you excellent return with none of the risks and fees associated, so it becomes an obvious choice due to all kinds of ease and efficiency.

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          • #20
            I don’t see what the macro environment in the 70’s has to do with success in the 2000’s. Not like these funds are still benefiting from an annual returns perspective from the 70’s. Furthermore getting started in the 70’s was great for the folks who were successful, but not so much for those that weren’t. Everything looks obvious in hindsight.

            The presence of institutional investors absolutely adds credibility to the platform. Sure sophisticated investors can make mistakes like Madoff, but the odds of fraud are much higher if no sophisticated institutional investors are invested.

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            • #21










              I just read his wikipedia entry.  He is among the 100th richest people in the world.  I read a few months ago that the state of Conn was worried he might leave if they increased taxes any more.  He is important to their tax base evidently.  Most hedge funds charge 2 and 20.  Meaning an AUM fee of 2% and 20% of any profits.  Even if the fund does well it must overcome a significant hurdle.  That being said yes I might invest if I had enough money.
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              One Top Taxpayer Moved, and New Jersey Shuddered


              “Our top-heavy economy has come to this: One man can move out of New Jersey and put the entire state budget at risk. Other states are facing similar situations as a greater share of income — and tax revenue — becomes concentrated in the hands of a few.”

              https://www.nytimes.com/2016/05/01/business/one-top-taxpayer-moved-and-new-jersey-shuddered.html

               
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              I stand corrected it was not Conn but NJ but both hedge fund guys.
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              Not meant as a correction sorry if it seemed that way.

              "

              Connecticut Feels Effect of Drop in Super-Rich Tax Payments


              "Sullivan acknowledged part of revenue decline can also be attributed to "a handful" of wealthy individuals who moved to more tax-friendly states — an issue frequently raised by legislative Republicans, who argue Connecticut's tax policies encourage the state's super-rich to move out."

              https://www.usnews.com/news/best-states/connecticut/articles/2017-05-07/connecticut-feels-effect-of-drop-in-super-rich-tax-payments

               

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