From NY Times, Business section, 4/10/11: "Yet fewer than half of the active funds that invest in the most valuable American companies... beat the market during the past decade."
But wait - aren't these money managers all Ivy League MBA, paid big bux, isn't it reasonable to expect they should ALL be above average?
-- Rich
They might like you to believe that, but of course there's very little correlation between being savvy enough to pass the MBA exams in Ivy League schools and actually being a good investor...
Some actually *are* excellent con men though! -- Pulling off a con on the scale that Bernie Madoff did requires a significant amount of skill!
Nope, completely unreasonable to expect that.
They're all from the same schools and learned the same things. If you start in the same place and do the same thing, do you expect significantly different results? Isn't that insanity?
start
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John Bogle figured out that investing in the broad market (Wilshire
5000) would beat all the silly managers that tried to do better. Who cares where they went to school?-Bill
RichD wrote in news:83bc5735-cc21-40ad-9df8- snipped-for-privacy@b13g2000prf.googlegroups.com:
This is what Scott Burns has been preaching for years. See his "Couch Potato" investing plan. Not only do these guys not beat the market, they charge you for screwing up. Not only will you do better, on average, you also recoup the management fees.
-- Cheerfully resisting change since 1959.
You must be including a lot of non-money managers for that to be true..
No, that would be one person doing the same thing expecting different results. When there's more than one person, it's inevitable that the results would be different because all people aren't the same as each other, much to the chagrin of the socialists.
Hope This Helps! Rich
According to Nicholas Taleb (author of "The Black Swan"), you should get your investment advice from New York taxicab drivers. Not because you'll get better information - but because you'll be less likely to place any faith in it.
The takeaway is that fund managers are not experts, since nobody can predict unpredictable results with long term accuracy. "Experts" are experts because they've just been lucky in the past - which can be no guarantee of future luck. He goes through this at some length in the book.
Taleb claims you should allocate as much of your portfolio as you can stand (risk), and spread it around to the wildest, riskiest, bunch of investments you can find. When any one of those pays off, the returns will dwarf all other investments you've made (both good and bad).
It's a good read if you haven't read it yet. (IMO)
-mpm
Of course they don't beat the market. They _are_ the market.
Cheers
Phil Hobbs
-- Dr Philip C D Hobbs Principal ElectroOptical Innovations 55 Orchard Rd Briarcliff Manor NY 10510 845-480-2058 email: hobbs (atsign) electrooptical (period) net http://electrooptical.net
Money managers make their money by having larger portfolios. Once they get big, any tactics that they use will be noticed by the market and someone will bet against them. Or front run them.
Berkshire Hathaway has this problem. Everyone is watching Warren Buffet and trying to get ahead of his trades.
-- Paul Hovnanian mailto:Paul@Hovnanian.com ------------------------------------------------------------------ Tech support: Do you have any windows open right now? Customer: Are you crazy? Its twenty below out!
The money managers aren't optimizing the investors/suckers return, they are optimizing their own.
Since the stock market is a betting pool with a house cut, only the house can reliably win.
John
Except that many "houses" are in the same pool. The size of the pool isn't fixed, either.
Yeah, the mistake many of the houses made was betting themselves. Sort of like an alcoholic bartender.
Ah, the "greater fool theory."
John
I have finally realized what part of the problem with our economy, especially the stock market is. Supposedly, the stock market is where a business can sell stock to obtain capital, where investors can participate in ownership of these companies. These owners can then also participate in the profits of those companies. However, now the companies sell there stock and, unless someone accumulates large amounts of it, basically ignores the owners of that stock. They pay lip service to "we are doing this for the stockholders" but in reality, they could care less.
The practice of sharing profits with the stockholders via dividends is becoming rarer and rarer. Now, the only real profit participaters in most companies, esp. high tech ones, are the board and the employees. The price of the stock is basically a betting game, where employees with stock options or stock purchase plans can bet a portion of their compensation on that stock value, i.e. will anyone want to buy it when they get it! This internalizing of the basic control function of stock ownership has made all the manipulations and fluctations of stock values just a game for investors and insiders. It no longer has any real tie to the value of the company or its profits.
Charlie
How about banks selling toxic CDOs on one side of the building and buying the same crap from the bank down the street on the other side?
The size of the economic pie is not fixed.
It's still a good read if you've already read it. One of those books where reading it once opens your mind up enough to learn more when you read it again.
-- Bill Sloman, Nijmegen
At Lake Woebegone, all the chidren are above average -
It's hilarious, that nobody saw the real ludicrousness of the Times item. cf. John Paulos: "Innumeracy"
-- Rich
The stock market is not zero-sum. Betting pools are.
-- Les Cargill
Les Cargill wrote
Betting pools are even worse than zero sum when you consider what gets extracted in commissions etc.
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