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New Efficient Frontier by Bernstien
Old 04-10-2007, 03:50 PM   #1
Recycles dryer sheets
Join Date: Mar 2005
Posts: 329
New Efficient Frontier by Bernstien
I think we have been discussing the exact same stuff below over and over again every 6months to an year.

<snippets below and I am waiting for soneone to talk about the Confirmation bias article by Clements as an argument as to why I posted this>


For many years, Iíve been troubled by a conundrum: If mutual fund investors are not earning the market return, even adjusting for expenses, who is taking the winning side of their transactions? The yawning gap between dollar-weighted and time-weighted mutual fund data demonstrates just how far short John Q. Public falls. Amazingly, professionals, as represented by the managers of hedge funds, mutual funds, and pension funds, donít do that much better
Kacperczyk and Seru cannot possibly mean that successful fund managers are able to uncover material nonpublic raw data on a large number of companies. Rather than "private information," I suspect what they meant was "private evaluation." That is to say, successful managers demonstrate an ability to think for themselves. Whatever their precise meaning, the message is clear: those who live by the buzz die by the buzz.
The message of both pieces is: If you want to earn high investment returns, youíre going to have to look far from the overgrazed investment commons. At a bare minimum, you have to tune out the noise from the media and analysts of all stripes, and actually think for yourself. This is not something everyone can do; abstracting investment ideas from Forbes does not count.

Beyond that, youíll probably need to avoid the public securities markets altogether and invest privately. Needless to say, purchasing and running a diversified stable of small concerns is not for the faint hearted, the quantitatively weak, or those without razor-sharp interpersonal skills, exquisite business training, and huge gobs of spare time.

The message for small investors is clear. Begin with the assumption that you value your independence, family, friends, and intellectual and physical development, and do not want to spend the rest of your life buying and managing small machine tool shops and insurance offices, or financing chip, software, and Internet startups. Even with their relatively lower returns, the public securities markets will allow most people to finance their childrenís education and their own retirement goals.

If you want to pick your own stocks and bonds, be my guest. Just donít imagine that making your decisions on the basis of publicly available information and analysis will lead you anywhere but to the poor house. Youíre going to have to look at the primary data and analyze it entirely by yourself. And youíd better be good at it.

Hope springs eternal in the human breast:Man never is, but always to be blest.
The soul, uneasy and confined from home,Rests and expatiates in a life to come.
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