Investing pioneer and friend of TEBI Charles Ellis has been dropping truth bombs again — this time in an interview with Howard Gold at MarketWatch.
Best known as the author of the classic book Winning the Loser’s Game, Charley is now aged 83, but has lost none of his sharpness and wit.
This is what he had to say:
We’re all active investors
“Every investor should be an active investor in the sense of actively figuring out who they are, what their circumstances are, what they’re trying to accomplish, what they’re trying to avoid, what will work for them [as a] long-term investment even as markets go up and down.”
Most of us should index
“If you ask most investors, how would you like to be able to describe your investment [performance] 10 years, 20 years, 30 years from now, most people would say, ‘Honestly, if I could be top quartile, I would be thrilled.’
“You can guarantee you will be in the top quartile. You’d probably be in the top half or one-third of the top quartile, but you’re guaranteed to be in the top quartile if you use indexing.”
Why beating the market is harder than ever
“If you go back 50, 60 years ago, a major securities firm might have had 15 analysts, but they would be mostly focused on finding “interesting” stocks for the partners, not for customers. Today, we have [hundreds of] analysts at every major securities firm. They’re all out there competing with each other for getting accurate, useful information into the hands of investors. But the consequence of the devices, computers and technology is that everybody knows everything all at the same time, everywhere. When you get that kind of talent back and forth, with that kind of information, and the intensity of competition, it doesn’t leave much room for nice people like you or me.”
What investors ought to focus on
“I do believe that there are certain fundamentals which people of all degrees of experience should be paying close attention to. Number one is who are you as an investor? What makes you unique? Then relate your investment portfolio to that unique set of circumstances that make you such a wonderful person. If you don’t take a long-term view, you’re almost guaranteed to be in trouble. I do think it’s kind of fun that you can do the easiest kind of investing the world has ever seen — indexing — and guaranteed to put you in the top quartile.”
Using an adviser makes sense
“I would recommend [working with an expert adviser] to anybody who was trying to do a good job with investing, and not make stupid mistakes. All of us make mistakes, but we don’t have to make so many.”
You tell ’em, Charley.
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