Falkenblog writes:
I recently discovered there is considerable amount of data documenting how much investors underperform indices, and it's being ignored. In the 2008 Journal of Pension Benefits, N. Scott Pritchard documented that that individual investors have done much worse than the indices that everyone assumes reflect investor returns. He looked at data from 401(k) plans, and found that from 1988 through 2007, while the S&P 500 returned 11.81 percent annually and Treasury bills returned 4.53 percent, the average investor achieved a return of only 4.48 percent.
If the average investor (and I think it includes the big funds) underperformed the indice, that means that a few did extremely well. It is then possible to make money on the stock exchange, but fund managers dont know how. Each year a different manager has alpha: like in a lottery, each year some lucky fellow hits the jackpot.
1 comments:
There is a systemic form of smoke and mirrors happening.
Somehow, one's money seems to disappear in these instruments; transaction costs, management fees, whatever; and good luck trying to either understand it or hold them to account.
Anon.
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