The
Joy of Passive Investing
Sooner
or later, most serious investors give up on active management.
The reason is simple: it fails to add utility. Neither clever
stock picking nor short-swing market timing prove to add
value after expenses.
As
Dr. Bernstein says, "Indexes will beat three-quarters
of active managers. If you look at a global portfolio, if
you actively manage each of 10 asset classes, chances are
you'll lose. To win in one asset class, you can be lucky
and beat the index. But if you're an investor, you need
to beat the benchmark in at least seven or eight of the
asset classes if you're investing in 10 to 15 asset classes.
The chances of doing that are close to zero."
According
to a study by FundExpenses.com,
from 1998 through 2002 mutual fund investors spent $120,000,000,000
on active stock picking expertise that lost them in aggregate
34% of their money.
