If insanity is doing the same thing over and over and expecting different results, investors are insane.
The way many investors manage their money seems to perfectly describe Albert Einstein’s definition of insanity: Doing the same thing over and over again and expecting different results. Here’s what isn’t working:
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What if you could create a forum for discussing the best way to invest in a responsible and intelligent manner? Who would you invite to participate in this debate? Here are my suggestions:
There would be no shortage of candidates to advocate stock picking, market timing and fund manager selection. Jim Cramer, for example, could tell you how he picks stocks featured on his "Mad Money" show.
Komal Sri-Kumar could discuss his views on market timing. He is the president of Santa Monica, Calif.-based Sri-Kumar Global Strategies Inc., a macroeconomic consulting firm that advises multinational firms and sovereign wealth funds on global risk. Mr. Sri-Kumar, commenting on the direction of the Dow Jones Industrial Average (DJIA), recently stated: "We are probably going to see a 2,000 or 3,000 point drop before we see [the] Dow [at] 20,000 years from now."
Read the rest of the article at The Huffington Post.
For more than a decade now, Standard & Poor's has been contributing to the debate over active versus passive investing by producing its S&P Indices Versus Active Funds, or SPIVA, scorecards. These twice-yearly scorecards evaluate the evidence concerning the performance of actively managed funds relative to their benchmarks.
They show, year after year, that fewer active managers of U.S. domestic equity funds demonstrate persistent outperformance than would be randomly expected. The only conclusion to draw from this data is that past performance is not a reliable predictor of future performance.
Standard & Poor's has expanded the scope of its reports, as well as the scope of the active-versus-passive management debate, with the launch of its European scorecard. The just-released inaugural report examines year-end results for 2013, in addition to the prior three- and five-year periods. Here are some of the report's key findings about European equity funds:
Read the rest of the article on CBS News.