A Warning About That Guy Who Is Beating the Market (The New York Times)
December 12, 2012
In the New York Times blog "Bucks," Carl Richards writes about “that guy,” meaning the one who seems to succeed in making all the right investment decisions.
“Based on the stories he tells you every time you run into him,” writes Richards, “making money in the stock market is easy. Picking the best mutual funds, easy! Beating the S&P 500, easy! Then, in his oh-so-casual way, he says, ‘If I can do it, anyone can do it. It’s easy.’”
Maybe. In questioning whether “that guy” is extra smart or just lucky, Richards turns to a study co-authored by Dartmouth’s Kenneth R. French, the Roth Family Distinguished Professor of Finance at the Tuck School of Business, who, Richards writes, “has already worked out these numbers. If you assume the fund beats the market by 5 percent per year, you would still need 64 years of data before you could be confident the superior performance was because of something other than luck.”
Read the full story, published 12/11/12 in The New York Times.