A.I.M. Users Bulletin Board

[ls7550]

Want to Beat the Stock Market? Avoid the Cost of ‘Being Human’

https://www.wsj.com/articles/active-vs-passive-index-fund-beat-the-stock-market-58e8bd83?st=0v7d1rmgtuwozx0&reflink=desktopwebshare_permalink

The typical fund returned an average of 7.7% annually over the three decades, after fees. Fund investors, however, earned only 6.9% annually because of their chronic compulsion to chase hot performance and flee when it goes cold.

Such buy-high-and-sell-low behavior tends to flood fund managers with cash at times when stocks have already risen in price—and to force the funds to sell stocks after a decline. The managers can perform only as well as their worst investors allow them to.

That cost of “being human,” as Prof. Bessembinder puts it, is almost as high as the drag from annual fees

Hmm! I wonder what would happen if you took the other side of those positions? Add-low/reduce-high. I guess you'd capture that difference/spread! How might one be more inclined to actually do that? Robert Lichello's AIM perhaps!

:)

Clive