Randomly Walking with John Stossel An entertaining way to learn a critical investing concept.
If there is one financial concept in the area of investing to learn in your lifetime, this is it. If you don't learn it, then please make sure your children/grandchildren learn it.
In 1992 John Stossel, as a young reporter on ABC's 20/20 TV news show, reported on the stock market's random nature. The story included the famous "dart portfolio".
Stossel threw about 12 darts at stock market listings on a wall to randomly create a portfolio and you can view Stossel's 20/20 episode here.
This passive portfolio performed quite well, beating all but one of the Wall Street experts.
This was a not a fluke - it was an entertaining way to demonstrate a fundamental concept in investing.
This concept is true then, literally at any time of any market day and in the future. It's been proven by science and math.
If you have any doubt call us. We can explain this concept a number of different ways. It goes against the messaging we receive in media and in our culture, so sometimes you need to be reminded of the truth.
As a part of this 20/20 episode, Stossel also interviewed Burton Malkiel, a Princeton economist, author of A Random Walk Down Wall Street, an influential book on the subject of stock markets which introduced the random walk hypothesis. Malkiel proves that asset prices behave randomly and that one cannot consistently outperform market averages. Find two more brief videos explaining aspects of passive investing by influential Dartmouth Economist, Prof. Kenneth French. Click here for Active vs Passive and click here for Picking a Superior Investment Manager. Another classic look at passive vs active found at Stanford University's web site is Nobel Laureate William F. Sharpe's paper The Arithmetic of Active Management. We hope you watch the videos, read Sharpe's brief paper and come to understand and appreciate passive investing. |
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What to Do Next
We regularly analyze folk's current investment strategy with nothing expected in return. We look at: - Overall Performance (vs. benchmark NOT Lipper average!)
- Portfolio Design
- Diversification
- Fees & Expenses
Since so many brokers use an active management strategy, the comparison to our model portfolios (passive) is usually eye-opening. An active strategy is fraught with difficult challenges like where to purchase a reliable crystal ball. (Maybe ask Harry Potter, never mind he's fictional.) Give us a call. You are your own fiduciary - and getting an objective review of how your precious assets are being invested is a wise move to protect yourself & your loved ones. We tell you how you're doing things right and wrong. 760-804-0910 |
