Performance differences, relative to a market benchmark, don’t really matter over the long-term. Short-term (months or years) under-performance is a fact of life if you are trying to beat the market.
Investors are better off investing in an index fund if they can’t deal with this fact. Otherwise, with human behavior being what it is, investors who can’t accept this fact will buy high and sell low –destroying their wealth in the process.
Volatility and the cyclical performance of active management (i.e. investors trying to beat the market) are really blessings in disguise for long-term investors. Continue reading “Do Professionals really beat the market? Or it’s a Paradox”