I just finished reading a book by Larry Swedroe called The Only Guide to Winning Investment Strategy You’ll Ever Need. In the book, he covers Modern Portfolio Theory and goes into great detail about why professionals are no better at guessing on the market than those who just bet on the S&P500 index. He compares picking stocks to random coin flipping, and he actually proves that those who would have just flipped coins would have beat the pros the majority of the time the past 20-30 years.
The book made alot of sense to me. How can portfolio managers, brokers etc. hope to beat a market that is nearly perfectly efficient? And even if there were a chance, the 80% of the market run by institutional investers have thousands of Harvard MBAs on their teams looking at every angle possible. Still, we see money managers profiled in the press and on TV as having beat the market. Interestingly enough, the ones profiled always seem to change, and if you track them over the years you find that you would have been better off just betting on that S&P 500 index.
What insight do you provide that the thousands of Harvard MBAs haven’t already uncovered? Or would you include yourself in the catagory of those who just happen to get lucky on very well researched choices? Not trying to be overly critical, but I really need to understand this. The fact that you have had great success in this contest can be expected as I’m sure all professionals have ups and downs. But I have seen very convincing evidence that over time leaving my money in non managed index funds that are diversified is the best strategy.
