03-09-2004, 9:05 PM | Post #106750 |
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Author Ron Ross was a professor of economics who has been an investment advisor for the past 23 years. His book, "The Unbeatable Market" contrasts the views of two communities--academia and Wall Street. Here are excerpts:
"Wall Street's favorite scam is pretending that luck is skill."
"The hype and casino atmosphere of the beat-the-market game results in investors being in the wrong place at the wrong time."
"The conclusion of countless studies is that beating the market is the result of luck, not skill."
"Wall Street does not want you to know the academic model and especially doesn't want you to believe it."
"Wall Street leads its customers toward stress, confusion, excessive activity, and unnecessary risk."
"Emotions--fear, impatience, panic, pride, overconfidence, overreaction, envy--are almost always detrimental to long-term investment success."
"12,000 funds create a house of mirrors for investors, If you feel confused, you have a lot of company and, sadly, that is just the way the industry wants it."
"Turnover amplifies costs and increases tax liabilities but is doomed to failure as a general strategy."
"Information has become cheap, but wisdom and insight are still priceless."
"Giving up the futile pursuit of beating the market is the surest way to increase your investment efficiency and enhance your financial peace of mind."
"What is your intention--investing or gambling?"
"Let others suffer the losses while you learn from their hard-earned lessons."
"There is no other proposition in economics that has more solid empirical evidence supporting it than the Efficient Market Hypothesis (EMH)"
"The EMH provides an internally consistent, logical, and evidence-based explanation of why it's difficult to beat the market. It also provides an explanation of how relative stock prices are determined and what causes changes in prices."
"Understand the EMH and you will understand how stock markets work."
"Profitable trading strategies are self-limiting and self-destructive, eventually discovered and eliminated through overuse. (Rubenstein)"
"The record demonstrates time and again that mutual fund managers do not make abnormal rates of return any more often than can be accounted for by pure chance."
"Carhart evaluated 1,892 equity funds for the period 1962 to 1993 for the equivalent of 16,109 'fund years.' He concluded, 'The results do not support the existence of skilled or informed mutual fund portfolio managers.'"
"Market efficiency is generally regarded as a given among academic financial economists."
"An implicit motto of the experts on Wall Street is 'often wrong but never in doubt.'"
"The current price of a stock is the best attaiable summary of all that's now knowable."
"Extensive studies by Davis, Brown & Groetzmann, Ibbotson and Groetzman, and Elton et al, all confirmed there is no significant persistance in mutual fund performance."
"The complexities of the investment world make it extremely easy to live in denial."
"Nobel laureate Paul Samuelson observed, 'Isn't it interesting that the best brains on Wall Street can't achieve mediocrity?'"
"If you happen to detect a recurring pattern, it's logical to assume that it's already reflected in the price, unless you think you are the only one alert enought to see it."
"Predicting interest rates is equivalent to predicitng bond prices, something no one has shown an ability to do."
"If a market beater (newsletter) actually had something valuable to sell, he wouldn't be selling it. He would exploit it himself."
"If you had a system that did actually beat the market, it would always pay to leverage."
"Their (Beardstown Ladies) story illustrates the lack of scrutiny or verification that is the rule in the investment world."
"Using your investments as entertainment is among the costliest and higher risk forms of recreation."
"If you know 1% of the relevant information about a company, which is about all you could hope to know, that information you have is extremely unreliable and error prone."
"There's no avoiding risk, so you're better off learning how to embrace it."
"Successful decision-making involves not only the costs and benefits of the menu of choices but also the probabilities of possible outcomes."
"Even for someone who is already retired, long-rang planning is still the appropriate perspective."
"There have been thousands of individual stocks that have suffered permanent loss, but never in this country has the overall market experienced permanent decline."
"At the very least, investors should not base their decisions on the assumption that the equity premium will always bae as high as it has been in the past."
"An investor's concern should not just be on the target, but also on the probability of hitting the target."
"Diversification is the cardinal rule of investing and the one most often violated."
"The period of 2000-2001 taught many investors and managers of mutual funds hard lessons about the hazards of ignoring diversification."
Originally posted in thread: 33725