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Quotes of the Week

August 31, 1998

We've gone from an environment where people are accustomed to a 30% return to one where they just want their money back.
Michael Clark in "Wall Street Winds Up Its Worst Week Since 1989" from The Los Angeles Times (8/29/98)

The odds of beating the market over the long run are not very good. The mere attempt to actively manage a portfolio typically has a variety of negative side-effects, including increased management fees, increased costs related to the increased number of stock purchases and sales, and increased or accelerated capital gain tax recognition resulting from the increased sales. . . Every financial market in the world (whether the U.S. stock market or the Brazilian bond market) is a "zero sum game" - a game where some win and some lose relative to a marketís return. (This means that the investor on one side of a market trade will always outperform the market return relative to that trade and the investor on the other side will underperform it, even though both investors can make money on the trade in an up market.) . . . In effect, the losing active investors who underperform a financial market are "sacrificial lambs" for the winning active investors who outperform it.
W. Scott Simon (author of Index Mutual Funds) in Prudent Investor Rule

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