In a world that thrives on 24 hours a day financial news, inactivity is seen as brain dead.
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I don’t think there’ll ever be another Buffett, partly for the longevity, but partly because many people could never sustain that kind of return without blowing up.
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People think they’re hiring a manager to make them money. But probably, they’re hiring a manager to keep them out of trouble and maybe fight their own instincts sometimes.
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In order to outperform, by definition, you have to depart from the crowd. You have to hold a different position.
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There’s nothing you can do in the interest of being above average that does not expose you to the risk of being below average.
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Most portfolio managers still pursue the elusive goal of “better than the market” performance. However, one should not dismiss the general premise because of its uncomfortable conclusions.
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Systematic outperformance requires variant perception: one must believe something different from what the market believes, and one must be right.
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We have three criteria. If it’s publicly traded, liquid and amenable to modeling, we trade it.
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Patterns of price movement are not random. However, they’re close enough to random so that getting some excess, some edge out of it, is not easy and not so obvious.
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Active managers are paid to add value over what can be earned at low cost from passive investing, and failure to do that is failure.
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The tools that get investors and speculators in and out of the market only after some widely followed average has turned must obviously exaggerate the movements of the market.
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The ability to outperform in the financial market requires creativity, vision, and the ability to see things that others cannot see.
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Managers should start out with the belief that if they are trying to actively manage money and outperform the market, the odds are against them.
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Money managers are not stupid. They realize that sticking one’s neck out and producing short-term under performance that differs from an index that is used as the benchmark is risky.
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If a money manager cannot explain in plain English what their investment principles are, they probably don’t have any. And if they cannot explain their process for finding and researching an investment idea, they probably don’t have that either.
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The principle of “managed” investment trusts is absolutely sound, granted only one premise. The premise is that there are somewhere people of such experience and insight that they can predict with some sort of accuracy the future behavior of securities.
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The mutual fund industry is not an investment management industry. It’s a marketing industry.
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The more you trade, the harder it is to add value because you’re absorbing a lot of transaction costs, not to mention taxes.
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You can only know so many companies. If you’re managing 50 or 100 positions, the chances that you can add value are much, much lower.
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I’m looking for somebody that’s got a screw loose and they define winning not by being as rich as they can be individually, but by producing great investment returns.
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Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.
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If some of the most astute people in Wall Street have frequently guessed wrong in trying to profit by stock market movements, it may not be too much to assume that the attempt itself has represented a misconception of the proper function of management.
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Common stocks properly selected and long-range will prove so attractive that I don’t believe that other forms of assets are a more attractive or suitable vehicle.
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Don’t think for a moment that small investors are the only ones guilty of too much attention to the rear-view mirror.
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Beating the market averages, after paying substantial costs and fees, is an against-the-odds game; yet a few people can do it, particularly those who view it as a game full of craziness with an occasional mispriced something or other.
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If you are not a professional investor, if your goal is not to manage money in such a way so you get a significantly better return than the world, then I believe in extreme diversification.
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I think there’s a tendency in the modern world of people wanting their money to be working hard, and I joke that our money is like a couch potato by comparison.
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The first thing I heard when I got in the business, not from my mentor, was bulls make money, bears make money, and pigs get slaughtered. I’m here to tell you I was a pig. And I strongly believe the only way to make long-term returns in our business that are superior is by being a pig.
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I am convinced that an individual investor with sound principles, and soundly advised, can do distinctly better over the long pull than a large institution.
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The laws of probabilities tell us that almost anyone can achieve phenomenal success over any given measurement period. It is the task of those evaluating a money manager to ascertain how much of past success is due to luck and how much to skill.
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In my experience, large increases in assets under management adversely affect returns.
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I think it would be an interesting change for integrity if managers of funds were required to have more of their own money in them.
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Managers do not create large alphas by being conventional. They do so by taking the risk of being wrong and alone.
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Mutual fund managers, desperate to put cash to work don’t buy what is cheap but what is working since what is cheap by definition hasn’t been working.
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I like the idea of having a little action. That may not be good from a logical point of view, but it’s good from an emotional point of view.
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A lot of mutual fund managers don’t know what they own. The odds are the best they have ever been for the individual.
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All you have to do, really, is find the best hundred stocks in the S&P 500 and find another few hundred outside the S&P 500, to beat the market.
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When I ran Magellan Fund, the market had 9 declines of 10 percent or more in those 13 years. I had a perfect record. All 9 times, my fund went down.
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If your preference is managed funds, you want a managed fund that, one might put it, is like a sailboat fighting not a typhoon of costs but only a breeze.
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On average, the average large-stock fund manager produces average returns before fees and below-average returns after fees. So compared with after-fee returns, an index fund is superior.
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There are two requirements for success in Wall Street. One, you have to think correctly; and secondly, you have to think independently.
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If all that can be promised is an average result, how can managers expect to be paid large fees for providing that average result?
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Beating the market averages, after paying substantial costs and fees, is an against-the-odds game; yet a few people can do it, particularly those who view it as a game full of craziness with an occasional mispriced something or other.
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Contrary to their oft-articulated goal of outperforming the market averages, investment managers are not beating the market: The market is beating them.
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It may be that professionally managed funds are too large a part of the total picture to be able to outperform the market as a whole; it may also be true, as I suspect, that certain weaknesses in their basic principles of stock selection tend to offset the superior training, intelligence, and effort that they bring to this task.
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