Investing Quotes - Page 19

• Index funds have regularly produced rates of return exceeding those of active managers by close to 2 percentage points. Active management as a whole cannot achieve gross returns exceeding the market as a while and therefore they must, on average, underperform the indexes by the amount of these expense and transaction costs disadvantages.

  Burton Malkiel

  Average, Cost, Active Management

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• Everybody has some information. The function of the markets is to aggregate that information, evaluate it and get it incorporated into prices.

  Merton Miller

  Information, Function, Evaluate

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• Even fans of actively managed funds often concede that most other investors would be better off in index funds. But buoyed by abundant self-confidence, these folks aren't about to give up on actively managed funds themselves. A tad delusional? I think so. Picking the best-performing funds is 'like trying to predict the dice before you roll them down the craps table,' says an investment adviser in Boca Raton, FL. 'I can't do it. The public can't do it.'

  Paul Samuelson

  Giving Up, Self Confidence, Thinking

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• Still, I figure we shouldn't' discourage fans of actively managed funds. With all their buying and selling, active investors ensure the market is reasonably efficient. That makes it possible for the rest of us to do the sensible thing, which is to index. Want to join me in this parasitic behavior? To build a well-diversified portfolio, you might stash 70 percent of your stock portfolio into a Wilshire 5000-index fund and the remaining 30 percent in an international-index fund.

  Paul Samuelson

  Fans, Want, Might

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• Nobody wants to be passive; indexing is not passive - much more goes into indexing than watching a stock become the next buggy whip.

  Charles R. Schwab

  Want, Next, Passive

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• The word passive does a disservice to investors considering their options. Indexing provides an effective means of owning the market and allows investors to participate in the returns of a basket of stocks. The basket of stocks changes over time as stocks are added or removed based on its rules.

  Charles R. Schwab

  Mean, Doe, Return

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• Most of the mutual fund investments I have are index funds, approximately 75%.

  Charles R. Schwab

  Mutual Fund, Investment, Index Funds

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• It's fun to play around... it's human nature to try to select the right horse... But for the average person, I'm more of an indexer... The predictability is so high... For 10, 15, 20 years you'll be in the 85th percentile of performance. Why would you screw it up?

  Charles R. Schwab

  Horse, Fun, Average

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• Properly measured, the average actively managed dollar must underperform the average passively managed dollar, net of costs. Empirical analyses that appear to refute this principle are guilty of improper measurement.

  William Forsyth Sharpe

  Average, Principles, Dollars

  "Do You Want to Be Just Average?" by Larry Swedroe, www.cbsnews.com. June 9, 2010.

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• Unless an investor has access to “incredibly high-qualified professionals,” they “should be 100 percent passive - that includes almost all individual investors and most institutional investors.

  David F. Swensen

  Individual, Should, Passive

  "Yale Gets Educated In Retirement Plans" by Dan Solin, www.huffingtonpost.com. August 23, 2016.

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• But whatever the consensus on the EMH, I know of no serious academic, professional money manager, trained security analyst, or intelligent individual investor who would disagree with the thrust of EMH: The stock market itself is a demanding taskmaster. It sets a high hurdle that few investors can leap.

  John C. Bogle

  Intelligent, Serious, Academic

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• While the apostles of the new so-called "behavioral" theory present ample evidence of how often human beings make irrational financial decisions, it remains to be seen whether these decisions lead to predictable errors that create systematic mispricings upon which rational investors can readily and economically capitalize.

  John C. Bogle

  Errors, Decision, Systematic

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• The efficient market theory is one of the better models in the sense that it can be taken as true for every purpose I can think of. For investment purposes, there are very few investors that shouldn't behave as if markets are totally efficient.

  Eugene Fama

  Taken, Thinking, Purpose

  "A Father of Modern Finance" by Rebecca Rolfes, www.chicagobooth.edu. 2013.

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• I take the market-efficiency hypothesis to be the simple statement that security prices fully reflect all available information.

  Eugene Fama

  Simple, Market Efficiency, Information

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• Question: So investors shouldn't delude themselves about beating the market? Answer: "They're just not going to do it. It's just not going to happen."

  Daniel Kahneman

  Answers, Happens, Investors

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• Many of us economists who believe in efficiency do so because we view markets as amazingly successful devices for reflecting new information rapidly and, for the most part, accurately.

  Burton Malkiel

  Believe, Successful, Views

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• We next consider the rule that the investor does or should consider expected return a desirable thing and variance of return an undesirable thing.

  Harry Markowitz

  Doe, Next, Return

  Harry Markowitz (2009). “Harry Markowitz: Selected Works”, p.15, World Scientific

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• ... Any pension fund manager who doesn't have the vast majority-and I mean 70% or 80% of his or her portfolio-in passive investments is guilty of malfeasance, nonfeasance or some other kind of bad feasance!

  Merton Miller

  Mean, Majority, Portfolios

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• Most people might just as well buy a share of the whole market, which pools all the information, than delude themselves into thinking they know something the market doesn't.

  Merton Miller

  Thinking, People, Might

  "Investment Gurus: A Road Map to Wealth from the World's Best Money Managers" by Peter J. Tanous, (p. 269), 1999.

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• Even if this advice to portfolio decision makers to drop dead is good advice, it obviously is not counsel that will be eagerly followed. Few people will commit suicide without a push. And fewer still will pay good money to be told to do what is against human nature and self-interest to do.

  Paul Samuelson

  Suicide, Self, People

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• Perhaps there really are managers who can outperform the market consistently - logic would suggest that they exist. But they are remarkably well-hidden.

  Paul Samuelson

  Logic, Wells, Managers

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• The debate can be put in the form of the question: Resolved, that the best of money managers cannot be demonstrated to be able to deliver the goods of superior portfolio-selection performance. Any jury that reviews the evidence, and there is a great deal of relevant evidence, must at least come out with the Scottish verdict: Superior investment performance is unproved.

  Paul Samuelson

  Able, Portfolios, Debate

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• Anyone with special abilities earns a differential return on that flair, which we economists call a rent. Those few with extraordinary P.Q. (Performance Quotient) will not give away such rent to the Ford Foundation or the local bank trust department. They have too high an I.Q. for that.

  Paul Samuelson

  Giving, Special, Return

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• The sad truth is that it is precisely those who disagree most with the hypothesis of efficient market pricing of stocks, those who pooh-pooh beta analysis and all that, who are least able to understand the analysis needed to test that hypothesis.

  Paul Samuelson

  Tests, Able, Analysis

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• First, those who disagree with market efficiency simply assert that it stands to common sense that greater effort to get facts and greater acumen in analyzing those facts will pay off in better performance somehow measured. (By this logic, cure for cancer must have been found by 1955).

  Paul Samuelson

  Cancer, Common Sense, Effort

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