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To: Art Bechhoefer who wrote (113098)	2/12/2002 6:28:33 PM
From: Wyätt Gwyön	Read Replies (1) \| Respond to of 152472

Don't you think investors are smart enough to invest in something other than the market averages? in a word: No. there is no evidence that investors can beat the market averages with persistence. i say that even though i am up a rather large amount since 1999 thanks to my own active management. consider this: you can take a good baseball hitter, look at his career batting average, and you can prove, to a high degree of statistical significance, that he is "above average". you can't do that with investors. somebody who was up 10,000% last year could lose 50% this year. THERE IS NO PERSISTENCE OF SKILL IN INVESTING. which is to say, there is no skill, only luck. of course, many investment professionals, whose income depends on convincing others that they have "skill", would disagree with this statement. they ignore a large body of statistical evidence. people who beat the averages often think they are their own best proof of the efficacy of skill in active management. instead, they are unwitting victims of survivorship bias. it is like somebody who rubs a lucky rabbit's foot and picks the winning lottery number. from his perspective, his rabbit's foot, combined with his skill at rubbing the foot, are responsible for his success. but there is a silent majority of unlucky-rabbit's-foot-rubbers that you never hear from. just like there is the silent majority of active investors who underperform the market. and among those who try to outperform in soize (by, e.g., leveraging investments in high-beta stocks), most underperform the market severely. it is axiomatic that investors in aggregate will underperform the market, since their returns are equal to the market returns minus trading costs. minimization of investment costs is another important focus area in my opinion. naturally, that opinion is not shared by Wall Street, whose job it is to pull an everlasting vig off the mark's purse.