Mark Hulbert attempts to answer the question, “Can You Beat The Market?” Hulbert uses a working paper by Kenneth French as the basis for this article. Check out Hulbert’s full article using the link below.
http://www.financialexpress.com/news/Can-you-beat-the-market-Its-a-100-billion-question/285039/
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Photograph: Big Deschutes River near Sunriver, Oregon
If you missed David Swensen on NPR this morning, you can catch it using this link. Near the top of the page, click on “Listen Now.”
http://www.npr.org/templates/story/story.php?storyId=6203264
Examine the asset allocation pie chart on the NPR page. Notice Swensen advocates a more conservative breakdown of assets compared to the AA-Mosaic Portfolio. As he points out in the interview, there is no one perfect allocation that fits all investors.
Here is an addition reference with specific index funds and ETFs identified to match Swensen’s asset allocation recommendations.
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Photograph: End of pew in the RAF Chapel, London, England
Photograph: Crater Lake Lodge
The reason for take the passive investing route to portfolio management is none other than playing the probability game. Let me quote again from David Swensen’s “Unconventional Success” book. “Security selection may provide substantial excess returns for skilled investors, but those excess returns come directly from the pockets of other players who suffer poor relative returns. When aggregating the returns for all actively managed portfolios, the combined results inevitably mimic the market, less a discount equal to the amount paid to play the game. For the investment community as a whole, security selection plays a return-reducing role in investment performance.” Swensen is simply stating what William Sharpe proved in “The Arithmetic of Active Management” paper.
If you are one of those individuals who know you can outperform the broad market by active management over the next 20-years, then by all means, keep selecting those stocks. However, the laws of probability are working against you. For this reason, we are taking the passive investing route.
Here is a short piece on Swensen and more of his advice. I too prefer to listen to David Swensen rather than Jim Cramer.
http://www.informationarbitrage.com/2007/06/why_i_love_dale.html
