How I Turned $1,000 into a Million Dollars in Real Estate ...

Ok, I will agree that odds do change in casino games. However, it still remains that overall the odds are against you, and things you can do to change this (using computers, card counting, etc) are banned in casinos. :)

It is true that payout and odds are both important, and thus odds can be in your favour from time to time (like with slot payouts), but I think it's fair that over time people lose money at casinos.

> The updated book shows that if you had
> bought shares in an INDEX FUND and held
> them, you would outperform by 50% most
> traders.

Yes, this is true, and I'd say it comes down to those additional costs traders have versus an index fund mentioned in my previous post. The one I forgot to mention is investment manager fees when you invest with a managed fund.

Index funds work on the premise that markets are efficient and managers don't add value, thus to maximise return you minimize fees by buying the index.

My opinion is that most fund managers do not add value, so it's important to find the few who do. :)

> The term used is an efficient /semi
> efficient market, and it states that most of
> the information is contained in the price.
> This is also the case in horse racing.

Yes, I'd say describing the market as semi-efficient (pricing in public information but not private) is fairly accurate. However I think it's a mistake to say that markets are *always* efficiently priced and more correct to say they are *mostly* efficiently priced, with occasional changes from the efficient price.

With that in mind, I'd say the trick with stock investing is to focus on the few companies you find that are away from a 'correct' price, and recognise that the majority are about right.

For those that haven't read already, I'm an analyst at a funds management firm in Sydney called PM Capital. Whereas most fund managers construct portfolios to mimic the index, and then modify their weightings to add value, we strive for an absolute return by focusing on the 10% or so of the market where valuations are out of line with reality, and thus don't have strong views or positions on the majority of the market.

I would say that PM Capital adds value as a fund manager, and is one of the few that does, but of course my opinion is biased. :) Long-term after-fee after-tax returns should show that, however.

- Thomas.




PM Capital