Active Management

“It may be that professionally managed funds are too large a part of the total picture to be able to outperform the market as a whole; it may also be true, as I suspect, that certain weaknesses in their basic principles of stock selection tend to offset the superior training, intelligence, and effort that they bring to this task.”

“Systematic outperformance requires variant perception: one must believe something different from what the market believes, and one must be right.”

“Active managers are paid to add value over what can be earned at low cost from passive investing, and failure to do that is failure”

“Managers should start out with the belief that if they are trying to actively manage money and outperform the market, the odds are against them.”

“Contrary to their oft-articulated goal of outperforming the market averages, investment managers are not beating the market: The market is beating them.”

“With a casual attempt to beat the market, you’re going to fail.”

“In order to outperform, by definition, you have to depart from the crowd. You have to hold a different position.”

“On average, the average large-stock fund manager produces average returns before fees and below-average returns after fees. So compared with after-fee returns, an index fund is superior.”

“The market doesn’t know everything, but it doesn’t know nothing, and knowledge is cumulative. The market knows stuff now that it didn’t know forty years ago, so it’s harder to outperform.”

“I think there is a mindset among many professional investors that if I go down the drain, well it is o.k. as long as everyone else is going down the drain with me.”

“Story stocks outperform facts — until they don’t.”

“Inefficiency doesn’t make it easier for all investors to beat the market.”

“The ability to outperform in the financial market requires creativity, vision, and the ability to see things that others cannot see.”

“Few holdings, well understood, outperform many held lightly.”

“Managers do not create large alphas by being conventional. They do so by taking the risk of being wrong and alone.”

“A lot of mutual fund managers don’t know what they own. The odds are the best they have ever been for the individual.”

“All you have to do, really, is find the best hundred stocks in the S&P 500 and find another few hundred outside the S&P 500, to beat the market.”

“The real problem is not finding a good fund manager, it’s finding the right time horizon for your investing and what your temperament is for volatility.”

“My stocks sometimes get overpriced, but in the long run this kind of company, if you can find it, will outperform the market and the economy. The worst thing you can do is try to catch the swings, sell out too soon and be afraid to buy back in.”

“To beat the market is not easy. In addition to a good investment manager, the investor needs perspective, patience, and courage — qualities that do not abound in today’s intensely competitive world.”

“If the stock market has a period of outperformance of its long-term return, it is inevitably followed by some period of underperformance. But people being optimistic and greedy by nature take the recent short-term outperformance of stocks as a sign of good things to come, rather than a warning of bad things to come.”

“Mutual fund managers, desperate to put cash to work don’t buy what is cheap but what is working since what is cheap by definition hasn’t been working.”

“If you are not a professional investor, if your goal is not to manage money in such a way so you get a significantly better return than the world, then I believe in extreme diversification.”