3 ms·
>People who deeply understand the companies in their portfolio will generally outperform the market at large by finding and exploiting mismatches in the market
by ch4s3 9y ago
>People who deeply understand the companies in their portfolio will generally outperform the market at large by finding and exploiting mismatches in the market (i.e. active management)
There is no evidence that I'm aware of suggesting that active management "generally' outperforms the market. In fact, most evidence points to the majority of active managers performing worse than the market in the long run.
- madengr 9y agoAgree. Once the management fees are considered, you don’t come out any better than an index fund. At least that’s the conclusion in A Random Walk Down Wall Street. Reminds me of John Stossel throwing darts into the newspaper stock section, and doing just as well as managed funds.
- pedrocr 9y agoIn aggregate it's mathematically impossible for active management to outperform the market: https://web.stanford.edu/~wfsharpe/art/active/active.htm https://web.stanford.edu/~wfsharpe/art/active/active.htm For every smart active manager that beats the index someone else is on the other side of the bet losing.
- ch4s3 9y agoThat's pretty much my point.
- pedrocr 9y agoI was reinforcing that it wasn't a matter of "evidence" it's just impossible.
- rphlx 9y agoNote though that once the market is majority passive - which seems likely within the next decade - it actually is theoretically possible for active to slightly outperform passive.