Luck or Skill??

When investors look for actively managed funds they invariably look at past performance and choose the funds with the highest return.  This is typical and the main reason the majority of investors DONOT earn at least the market rate of return.

Several recent studies have proven that the above strategy is flawed.  Actively managed mutual funds with performance greater than the market cannot contend that this performance had anything to do with skill on their part.  No investment skill is evident. 

Have you ever watched a private equity video where the manager is driving a $500,000 car? In most cases this is because the manager makes much more money than their clients. There are numerous examples of private equity managers not beating market returns. And in many cases losing.

The overall evidence suggests that private equity investing is a ‘crapshoot’. 

Of course, there are always examples of private equity firms becoming successful. But in most cases this success is short lived. Primarily because their success is a matter of luck and not skill.

The same can be said for brokers and ‘investment pros’ who claim to be able to time the markets, pick outperforming stocks or select mutual funds that will outperform other mutual funds.  Any prior success can only be attributable to luck not skill.

To be successful in investing you must own equities…globally diversify…rebalance.

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