Many academics have earned Nobel Prizes for their research and explanation of how stock markets work. Their findings lack bias, as these Nobel Laureates aren't trying to earn a commission or sell magazines and newspapers. More than a hundred years of academic research points to index funds as an investor's best investment. Sadly, the great majority of investors have never read these academic studies, and continue to actively invest.
2.1
One of the biggest hurdles investors face is knowing where to access
reliable, non-biased stock market research that will point them in the
right direction for investing appropriately. Because Nobel laureates
have neither the budget nor the intellectual inclination to hire pricey
Madison Avenue advertising agencies to promote their astute findings,
most investors are unaware of the mountains of peer-reviewed research
on investing. Additionally, because their findings run counter to the
siren songs for active trading, played by the dozens of brokerage houses
churning billions of dollars, investors who want to know
the truth have to dig a lot deeper than CNBC.
Step 2 of this 12-Step Program for Active Investors provides a comprehensive
overview of ample non-biased studies regarding the historical returns
of stock market investing. In a nutshell, Step 2 will give you a summary
of this research that you won’t see in business magazines, hear
on the radio, or see on TV. Here, I cover the objective conclusions drawn
from 300 years’ worth of unbiased, rigorous, and empirical research
conducted by academics. This body of research discredits the conventional
Wall Street wisdom that a stock picker, armed with enough knowledge and
research, can consistently beat the market. The open access to such important
information rests at the heart of an investor’s ability to understand
that active trading is a destructive force that eats away at capital,
returns and quality of life. Once an investor recognizes the value of
this truly useful information and research available to them, they are
well on the road to recovery and real profits. Although this step is
titled “Nobel Laureates,” numerous
academics will also be discussed who have researched the stock market,
but have not been awarded a Nobel Prize.
"
Sooner than I dared expect, my explicit prayer
has been answered. There is coming to market...
something called the First Index Investment
Trust.... offering extremely low portfolio turnover;
and best of all, giving the broadest diversification
needed to maximize mean return with minimum
portfolio variance and volatility."
Newsweek
Magazine, August 1976, also"It
is not easy to get rich in Las Vegas, at Churchill
Downs, or at the local Merrill Lynch office.
"
- Professor
Paul A. Samuelson, Massachusetts Institute
of Technology, Economist, Nobel Laureate in
Economics, 1970
"
Most of my investments are in equity index funds." BusinessWeek and "Why pay people to gamble with your
money? "
Question:
So investors shouldn't delude themselves about
beating the market? Answer: "They're just
not going to do it. It's just not going to happen."
Question:
I wonder if I might ask you, ...how do you think
people should invest for the future...? Should
they buy index funds? Answer: "Absolutely. I
have often said, and I know this will get some
of your readers mad, that any pension fund manager
who doesn't have the vast majority—and
I mean 70% or 80% of his or her portfolio—in
passive investments is guilty of malfeasance,
nonfeasance or some other kind of bad feasance!
There's just no sense for most of them to have
anything but a passive investment policy."
