Personal Wealth

Why Is It So Hard To Beat the Market?

The data is in and, for fund managers who are still trying to “beat” the market, the numbers are still not on their side. As talented as active players often are at slicing and dicing the data, and as mightily as they may try, there’s considerable evidence that passive players continue to have the last laugh. Why is that? As usual, it has a lot to do with common sense.

Behavioural Finance

A Hidden Bias Is Killing Your Returns

Until recently, it was frustrating trying to convince you to become an evidence-based investor. Part of the problem was persuading you that brokers and self-appointed stock market gurus are emperors with no clothes. There’s no credible evidence anyone has the expertise to reliably and consistently pick outperforming stocks, tell you when to get in and out of the market or pick the next “hot” mutual fund manager.

Tracking error is not a risk, you are

Research has shown that small cap, value, and high profitability stocks have higher expected returns than the market. They also exhibit imperfect correlation with the market. Building a portfolio that tracks the market, and then increasing the portfolio weight of small cap, value, and high profitability stocks increases the expected return and diversification of that portfolio. From a human investor’s perspective, the problem with higher expected returns is that they are expected, not guaranteed. And that imperfect correlation?