Skip to main content

Posts

Showing posts from July, 2014

Being a Cynic of Active Stock Picking

Active management has been the traditional way consumers invest their money. This traditional method says through research, an investor may discover a stock trading at a discount to it's true value. This 'informed investor' may then profit at the expense of the 'uninformed investor' who is willing to sell the stock below it's true value.

Yet a drastic shift has occurred over the last decade with more dollars going into index or index-like strategies. Traditional investors have been disappointed with active-management results and have migrated to lower-cost, indexing strategies.  

Scott Burns at Morningstar recently spoke with AQR Capital Management's founder Cliff Asness -- a well-respected academic turned money manager whose strategies are based on empirical studies.  Asness said, "I tend to be on the cynical side when it comes to stock-picking." Asness points out that as more dollars chase market inefficiencies (aka mispricings), it becomes harder…