Vanguard Interviews Justin Fox

By on February 22, 2010

Vanguard, the huge mutual fund company known for their low cost index funds, recently interviewed Justin Fox, author of The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. Fox discusses how difficult it is to latch onto someone who can beat the market:

Yes, it’s really hard to beat the market, but it is not impossible, and not everyone who beats the market consistently is just lucky. It’s not so much having information that other people don’t have that allows you to beat the market—it’s much more being willing to stick with certain investing strategies. But very often, if you identify one of those rare professional investors who has figured out something and is able to stick to it and can outperform the market, their price gets bid up. It gets really hard, when you’re hiring professional managers, to beat the arithmetic: The more you pay in fees, the lower your net performance.

There may be 5% of people out there who would be better off if they actually followed their own ideas. But that’s a pretty small percentage, and I am not one of those people. One of the lessons I got very clearly from years working on this book is that I am not one of those market-beaters! I invest passively.

Source: Vanguard
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