Art,
think about it this way. the main determinant in an investor's performance is the asset class they are invested in. we know from history that asset classes come and go (in terms of performance). so somebody who is just in one asset class is going to outperform some of the time, and underperform some of the time. i.e., somebody does great in large-cap tech one year, then horrible another year. same could be said for gold, real estate, etc.
so somebody who is statistically "skillful"--i.e., can consistently outperform the market the way good baseball hitters can consistently have above-average batting averages year after year--is going to have to hop from one asset class to the next.
this implies one must be an expert in "market timing". there is no statistical evidence anybody can do this CONSISTENTLY, but in any case, market timing among asset classes is a different strategy from the "know-one (or a few)-stock(s)-real-well" approach you seem to be advocating.
because obviously if you do well in QCOM in 99 because your deep knowledge of it in 98 caused you to overweight it (thereby exploiting an inefficiency), you would need to dump that strategy in 2000, 2001, and (so far) 2002 for some totally unrelated strategy, such as shorting the market, investing in value, gold, REITS, etc.
and then next year you would perhaps need yet another strategy, and so on.
which means you need a meta-strategy that perfectly allows you to switch between module-strategies (i.e., time the market). this is the kind of thing i say doesn't exist. |
