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Comment by seanmcdirmid | Hacker News Reader

We had this discussion in previous posts about congressional leaders who had the risk appetite to go tech heavy and therefore outperformed normal congress critters.

Going heavy on tech can be rewarding, but you are taking on more risk of losing big in a tech crash. We all know that, and if you don't have that money to play riskier moves, its not really a move you can take.

Long term it is less of a win if a tech bubble builds and pops before you can exit (and you can't out it out to re-inflate).

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They didn't just outperform "normal" congress critters.. they also outperformed nearly every hedge fund on the planet. But they (meaning, of course, just one person and their spouse) are obviously geniuses.

Hedge funds suck though. They don’t invest in FAANG, they do risky stuff that doesn’t pay off, you are still comparing incomparable things.

I’m obviously a genius because 90% of my stock is in tech, most of us on HN are geniuses in your opinion?

What do you think hedge funds do?

They use crazy investment strategies that allow them to capture high returns in adverse general market conditions, but they rather under perform the general market in normal and booming conditions. “Hedge” is actually in their name for a reason. Rich people use hedge funds for…hedging.

Downside protection. Hedging. Giving you gains at the lowest beta possible.

Hedge funds’ goals are often not to maximize profit, but to provide returns uncorrelated with the rest of some benchmark market. This is useful for the wealthy as it means you can better survive market crashes.

They also outperformed themselves before being in a leader position...

This is a wildly disingenuous interpretation of that study.

“ Using transaction-level data on US congressional stock trades, we find that lawmakers who later ascend to leadership positions perform similarly to matched peers beforehand but outperform them by 47 percentage points annually after ascension. Leaders’ superior performance arises through two mechanisms. The political influence channel is reflected in higher returns when their party controls the chamber, sales of stocks preceding regulatory actions, and purchase of stocks whose firms receiving more government contracts and favorable party support on bills. The corporate access channel is reflected in stock trades that predict subsequent corporate news and greater returns on donor-owned or home-state firms.”

https://www.nber.org/papers/w34524

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