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Academic Studies

Science is used in so many areas to try and improve outcomes. But when it comes to people’s investment strategies, it seems to carry little weight. At Your Fair Share, we believe it makes sense to look at the academic contribution of leading academics and economists, many of whom are Noble Prize winners.   

A pictorial of their contributions can be found here     

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What the Experts Say

What Experts say about the ‘Failure of Active Management’ 

 

“I am no longer an advocate of elaborate techniques of security analysis in order to find superior value opportunities.  This was a rewarding activity, say forty years ago, when Graham and Dodd was first published; but the situation has changed … [Today] I doubt whether such extensive efforts will generate sufficiently superior selections to justify their costs … I’m on the side of the ‘efficient’ market school of thought.”
– Benjamin Graham, legendary investor; considered to be the father of fundamental security analysis, the basis of active management decisions  

“A blindfolded chimpanzee throwing darts at the Wall Street Journal could select a portfolio that would do as well as experts.”
– Burton G Malkiel, ‘A Random Walk Down Wall Street’  

“I’d compare stock pickers to astrologers, but I don’t want to bad-mouth astrologers.”
– Eugene F Fama, Finance Professor, University of Chicago  

“It’s human nature to find patterns where there are none and to find skill where luck is a more likely explanation (particularly if you’re the lucky [mutual fund] manager).”
– William Bernstein, The Intelligent Asset Allocator  

“Our stay-put behavior reflects our view that the stock market serves as a relocation centre at which money is moved from the active to the passive.”
– Warren Buffett  

“The deeper one delves, the worse things look for actively managed funds.”
– William Bernstein, The Intelligent Asset Allocator  

“It’s just not true that you can’t beat the market.  Every year about one-third of the fund managers do it.”  He then quickly added, “Of course, each year it is a different group.”
– Robert Stovall, appearing ABC News’ 20/20 on 27/11/1992

What Experts say about ‘Market Timing’    

 

“If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen to the stock market.”
– Benjamin Graham, Legendary Investor and Author  

“There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know.  Then again, there is a third type of investor – the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.”
– William Bernstein, The Intelligent Asset Allocator  

“After nearly fifty years in this business, I do not know of anybody who has done it [market timing] successfully, and consistently.  I don’t even know anybody who knows anybody who has done it successfully and consistently.”
– John C Bogle, Sr, Former Chairman & Founder, The Vanguard Group  

What Experts say about ‘Past Performance’   

 

“Trying to pick tomorrow’s winning fund based on yesterday’s performance is difficult if not a futile task.  Concentrate on solid performers and stick with those.  Constantly switching your money from one fund to another is an expensive habit that is harmful to your net wealth.”
– Peter Lynch, Legendary Manager of Fidelity Magellan  

“I do not believe that they (investment advisers) can identify, in advance, the top-performing managers – no one can! – and I’d avoid those who claim they can do so.”
– John C Bogle, Sr, Former Chairman & Founder, The Vanguard Group  

“Yesterday’s masters of the universe are today’s cosmic dust.”  Masters of the Universe to Cosmic Dust.  Hard to see them getting hit by an asteroid.  They can’t see it … analysts can’t see it … and neither can you.
– Alan Abelson, Barrons

What Experts say about ‘Individuals on Investing’ 

 

“Ignore market timers, Wall Street strategists, technical analysts, and bozo journalists who make market predictions … Admit to your therapist that you can’t beat the market.  Investors would also benefit by remembering this simple phrase: trading is hazardous to your wealth.”
– Jonathan Clements, Columnist, Wall Street Journal

“After twenty years of watching investment practitioners dance around the fire shaking their feathered sticks, I observe that far too many of their patients die and that the turnover of medicine men is rather high.  There must be a better way.”
– John C Bogle, Sr, Former Chairman & Founder, The Vanguard Group

“People exaggerate their own skills.  They are overoptimistic about their prospects and overconfident about their guesses, including which [investment] managers to pick.”
– Professor Richard Thaler, University of Chicago

“Individuals aren’t as bad at picking stocks as many people think.  They’re worse.” 
– Terrance Odean, Professor of Finance

“The investor’s chief problem – and even his worst enemy – is likely to be himself.”
– Benjamin Graham, (1894-1974) Legendary American Investor, Scholar, Teacher and Co-author of the 1934 classis, ‘Security Analysis’

“If you are prepared to do something stupid repeatedly, there are many professionals happy to take your money.”
– Richard H Thaler, ‘The Winner’s Curse’

“The difference between luck and skill is seldom apparent at first glance.”
– Peter L Bernstein

“Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”
– Albert Einstein, German-American Scientist