The collective knowledge of financial markets is one of the reasons it is extremely difficult for active managers to consistently outperform the market.
Listen now and learn:
- Why groups are good a guessing the weight of cows and jellybeans
- The reason you should assume market prices aren’t wrong
- The importance of harnessing the power of markets for your own portfolio
Listen Now
Show Notes
Welcome to The Long Term Investor. Next week’s episode features Andrew Berkin, co-author of one of my favorite books on the challenges of active management: The Incredible Shrinking Alpha.
There is an overwhelming amount of evidence that shows traditional active management is a losing strategy, but the allure of beating the market (or what we finance nerds call alpha) still attracts investors of all kinds. Andy’s book does a great job of addressing the important issues related to this topic, so I’m excited for you to hear that conversation.
And since his interview is recorded and ready to go for next week, this week I want to revisit an important concept that I first wrote about back in 2017: The Collective Wisdom of Financial Markets.
This episode is basically me reading that blog post with a few minor exceptions, so check out that post if you prefer to read over listening.
Other resources mentioned in this episode that you may find useful on this topic include:
- Episode 14: How Markets Work
- Market Prediction is Harder Than You Think
- Thinking About Markets Like Piles of Sand
- Active vs Passive: The Wrong Debate
Tune in next week to hear my interview with Andrew Berkin and the week after that I will unpack the latest data comparing the performance of active managers to their respective indexes.
I’d also appreciate it if you took the time to rate and review the show on whatever podcast platform you regularly use. That makes it easier for people to find and enjoy the show.
Resources
- The Incredible Shrinking Alpha by Larry Swedroe and Andrew Berkin
- The Collective Wisdom of Financial Markets
- Episode 14: How Markets Work
- Market Prediction is Harder Than You Think
- Thinking About Markets Like Piles of Sand
- Active vs Passive: The Wrong Debate
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About the Podcast
Long-term investing made simple. Most people enter the markets without understanding how to grow their wealth over the long term or clearly hit their financial goals. The Long Term Investor shows you how to proactively minimize taxes, hedge against rising inflation, and ride the waves of volatility with confidence.
Hosted by the advisor, Chief Investment Officer of Plancorp, and author of “Making Money Simple,” Peter Lazaroff shares practical advice on how to make smart investment decisions your future self with thank you for. A go-to source for top media outlets like CNBC, the Wall Street Journal, and CNN Money, Peter unpacks the clear, strategic, and calculated approach he uses to decisively manage over 5.5 billion in investments for clients at Plancorp.
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