Formato FODA

INVESTING TO BEAT THE
MARKET
Simon Benninga
Faculty of Management
Tel-Aviv University

‫דבר תורה—פרשת יתרו‬
Dvar Tora
Jethro—the first management
consultant
Also an investment consultant?
The Tora and speculation
Lending and Heter Iska

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May a Jew invest in stocks?

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10 LESSONS ABOUT
INVESTMENTS
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1. Risk and return arerelated. The
larger the risks, the larger the
(expected) returns.

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Risk and return—U.S. Stocks

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10 LESSONS ABOUT
INVESTMENTS
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2. Pastperformance is a poor
indication of future performance

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10 LESSONS ABOUT
INVESTMENTS
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3. Market timing is mostly futile
(and costly ... see #8)

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10 LESSONS ABOUT
INVESTMENTS
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4. There is some persistence in stock
market returns, but it may be difficult toexploit.

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10 LESSONS ABOUT
INVESTMENTS
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5. There are no magic formulas and it’s hard to
predict

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10 LESSONS ABOUT
INVESTMENTS
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6. Don’t believe most of the investment
nonsense you hear.
Over any particular time period,half of all
investments outperform the average.
Typically, out-performers have wonderful
after-the-fact explanations for why this
happened. Over the same period of time,
half of all investments underperform the
average, and under-performers have good
reasons why this happened.
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http://www.pa-investors.com/annual.html
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"Last year, it turnedout good. We were down 2 percent, but the S&P was
down nearly 12 percent, and Nasdaq finished down 20 (percent). So we
outperformed the market," he said. Bateman said that a number of analysts
contribute to the company's annual stock list, utilizing what he referred to as
a top-down approach.
Essentially, Bateman analyzes each sector's performance in various stages of
a business cycle. Giventhe prevailing stage of the current cycle, the analysts
look to which sector has a high-probability of outperforming the market.
"Basically, our model does a number of regression studies looking at where
we are in the current cycle and what industries have done the best."
"We focus on those sectors that look the most attractive and identify the
companies that are the most attractive in thosesectors."
As way of example, Bateman said that hotels historically have performed
well during the existing phase of a business cycle. In fact, the probability of
the hotel sector outperforming the S&P 500 exceeds 50 percent in each
quarter this year.
From there, it was a matter of selecting which hotel stock would be the best
pick for the year, and Huntington analysts determined that to beMarriott
International.
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10 LESSONS ABOUT
INVESTMENTS
„

7. Most investment advice is worthless.

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10 LESSONS ABOUT
INVESTMENTS
„

8. Fees are important: 1% per year
over 10 years = 13%

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10 LESSONS ABOUT
INVESTMENTS
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„
„9. Relate investment decisions to:
a. Your investment horizon: The
longer it is, the more risk you should be
willing to take.
b. Your risk-tolerance.
c. The costs of managing your
portfolio.
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10 LESSONS ABOUT
INVESTMENTS
„

10. It’s very hard to beat the market.
Investment in index funds (passive
management) is preferable to managed
funds

Shimon...