It is known that any investor respecting himself puts the main objective ensuring profitability on the invested capital.
Both intraday traders and strategic investors aspire to it.
But how to define, an activity of the managing director is how productive? It is clear, that negative profitability is
inefficiency indicator, but how indeed to estimate actual cost-effectiveness? Let’s assume, the trader earned about 20% in a year,
at a growth of index fund by only 15%. Whether it is worth investing in this managing director? Considering that a mean square deviation
at the trader is higher than at the index (coefficients 0,1 and 0,05 are taken), it is possible to calculate Sharp’s indicator for two portfolios: for the trader,it will turn out 1.2, for the index 1.4. And it means that the trader spending for work with the market till many hours a day in the long term
will lose on profitability to the one who bought index fund.
It, of course, rough approach, and I do not consider that active management has no chances to overtake the index. Moreover, is
set of examples of how on an extent of decades funds showed the profitability advancing a benchmark by percent.
The idea is that before trying to overtake the index, it is necessary at first to be able to show profitability, commensurable with it. In search of the answer
on this question I came across material about how to operate risks in buy&hold of strategy for index funds. Especially it was pleasant to me
the idea with rebalancing of positions on volatility.
Generally, here article if to whom it is interesting:
http://www.long-short.ru/post/indeksnoe-investirovani..
Both intraday traders and strategic investors aspire to it.
But how to define, an activity of the managing director is how productive? It is clear, that negative profitability is
inefficiency indicator, but how indeed to estimate actual cost-effectiveness? Let’s assume, the trader earned about 20% in a year,
at a growth of index fund by only 15%. Whether it is worth investing in this managing director? Considering that a mean square deviation
at the trader is higher than at the index (coefficients 0,1 and 0,05 are taken), it is possible to calculate Sharp’s indicator for two portfolios: for the trader,it will turn out 1.2, for the index 1.4. And it means that the trader spending for work with the market till many hours a day in the long term
will lose on profitability to the one who bought index fund.
It, of course, rough approach, and I do not consider that active management has no chances to overtake the index. Moreover, is
set of examples of how on an extent of decades funds showed the profitability advancing a benchmark by percent.
The idea is that before trying to overtake the index, it is necessary at first to be able to show profitability, commensurable with it. In search of the answer
on this question I came across material about how to operate risks in buy&hold of strategy for index funds. Especially it was pleasant to me
the idea with rebalancing of positions on volatility.
Generally, here article if to whom it is interesting:
http://www.long-short.ru/post/indeksnoe-investirovani..
