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April 26, 2004 12:08 PM Subscribe
Chris Leithner on the state of finance. Modern Portfolio Theory is central to most business-school investments curricula, but it has its detractors.(last link pdf)
Only read the main link, but it is a good one.
One can never spend too much time contemplating the economic and political phenomena of the early 1970s. So many fundamental beginnings, ends, zeniths, nadirs, and inflection points occurred back then, and I have to think they were all related. The huge economic interventions and displacements, the beginning of the decline of organized labor and rise of divorce and the two-earner family among the intact, the loss of a war for the first time in history -- and absurdly undervalued financial assets.
Essentially every strain of contemporary politics and social practice was born in the space of a few years -- the radical left began to instutionalize in the Democratic Party, the conservative Evangelicals began to organize, affirmative action and multiculturalism started to take place, mass immigration started to accelerate, etc.
posted by MattD at 2:56 PM on April 26, 2004
One can never spend too much time contemplating the economic and political phenomena of the early 1970s. So many fundamental beginnings, ends, zeniths, nadirs, and inflection points occurred back then, and I have to think they were all related. The huge economic interventions and displacements, the beginning of the decline of organized labor and rise of divorce and the two-earner family among the intact, the loss of a war for the first time in history -- and absurdly undervalued financial assets.
Essentially every strain of contemporary politics and social practice was born in the space of a few years -- the radical left began to instutionalize in the Democratic Party, the conservative Evangelicals began to organize, affirmative action and multiculturalism started to take place, mass immigration started to accelerate, etc.
posted by MattD at 2:56 PM on April 26, 2004
Very interesting links, thanks.
And the Bogle thing is sort of disingenuous I think... yes, the set of all investors cannot outperform the market, since the set of all investors equals the market. But, an individual investor _can_ outperform it. If you're confident in your abilities, can tolerate risk, and have the time, value investing may be beneficial. eg Buffet's success.
posted by Spacelegoman at 5:50 PM on April 26, 2004
And the Bogle thing is sort of disingenuous I think... yes, the set of all investors cannot outperform the market, since the set of all investors equals the market. But, an individual investor _can_ outperform it. If you're confident in your abilities, can tolerate risk, and have the time, value investing may be beneficial. eg Buffet's success.
posted by Spacelegoman at 5:50 PM on April 26, 2004
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"Most investors, both institutional and individual, will find that the best way to own common stocks is through an index fund that charges minimal fees. Those following this path are sure to beat the net results (after fees and expenses) delivered by the great majority of investment professionals."
From 1996 Annual Report for Berkshire Hathaway Corporation. Warren E. Buffett, President, and 2nd wealthiest person in the US.
Bogle, too..
"Investors as a group cannot outperform the market, because they are the market. And from that theory flows the reality: Investors as a group must underperform the market, because the costs of participation—largely operating expenses, advisory fees, and portfolio transaction costs—constitute a direct deduction from the market's return. Unlike actively managed funds, an index fund pays no advisory fees and limits portfolio turnover, thus holding these costs to minimal levels. And therein lies its advantage. That, essentially, is all you need to know to understand why index funds must provide superior long-term returns. "
From "The First Index Mutual Fund: A History of Vanguard Index Trust and the Vanguard Index Strategy" by John C. Bogle
'Nuf said.
posted by ZenMasterThis at 12:46 PM on April 26, 2004