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Jason Zweig: Less Is More: What Small Investors Can Learn From a Pension Giant
Even Yale/Harvard endowments are not using 200 investment vehicles. Read elsewhere that Calpers failed to keep up with the expected return in recent years and thus they ventured into hedge funds without knowing the cost and benefits.
Ted, you are not alone in an overarching investment policy to Keep It Simple Stupid (KISS). A decade ago I owned most everything, mostly based on believed “expert” recommendations that accumulated over time. Today, I wholeheartedly join your KISS inspired ranks.
The wisdom of the crowd works in some circumstances and under certain conditions. But it often fails, and becomes the senselessness of the crowds. I battle to pair down my holdings and am slowly winning that challenge.
Outfits like CNBC and guys like Jim Cramer make it difficult with their frantic reporting. Guys like Jack Bogle and David Swensen get little press and even less air time because of their boring passive investment endorsements. We tend to follow the thundering herd rather than think and act independently. I suppose the behavioral wizards would call that a Confirmation bias; a bias that followers practice which could be harmful to end wealth.
Whenever I reflect on herd behavior, I recall the funny but serious bit that appeared many years ago on the old Candid Camera TV show. In that historical TV segment, a victim would get on an elevator with a group that was part of the ploy. The door would close and the in-group would unnaturally and simultaneously turn away from the door. Mostly, the victim would do the same. Herd instincts are hard to overcome.
Not only do investors become members of the herd, but so do financial journalists. Lately, the “less is more” theme has been making the news cycle rounds. CALPERS has been pruning their advisor army and expenses for several years now. It has been a lesson a long time in the learning. With so many diverse advisors, CALPERS had to be like the market itself, although with very high expenses. That’s a loser’s game.
Why do folks continue to support active fund managers? Although the odds of superior performance are definitely against them, these investors play the equivalent of the Lottery. They hope for the bigger payoff. There are a legion of sub-par performers, but there are some winners too. Hope is eternal.
I played that game for many decades, but not anymore. KISS works and is far less worrisome and is far less time intensive. Some lessons come slowly. Jason Zweig is spot on-target in this instance. And so are you, Ted.
Comments
Ted, you are not alone in an overarching investment policy to Keep It Simple Stupid (KISS). A decade ago I owned most everything, mostly based on believed “expert” recommendations that accumulated over time. Today, I wholeheartedly join your KISS inspired ranks.
The wisdom of the crowd works in some circumstances and under certain conditions. But it often fails, and becomes the senselessness of the crowds. I battle to pair down my holdings and am slowly winning that challenge.
Outfits like CNBC and guys like Jim Cramer make it difficult with their frantic reporting. Guys like Jack Bogle and David Swensen get little press and even less air time because of their boring passive investment endorsements. We tend to follow the thundering herd rather than think and act independently. I suppose the behavioral wizards would call that a Confirmation bias; a bias that followers practice which could be harmful to end wealth.
Whenever I reflect on herd behavior, I recall the funny but serious bit that appeared many years ago on the old Candid Camera TV show. In that historical TV segment, a victim would get on an elevator with a group that was part of the ploy. The door would close and the in-group would unnaturally and simultaneously turn away from the door. Mostly, the victim would do the same. Herd instincts are hard to overcome.
Not only do investors become members of the herd, but so do financial journalists. Lately, the “less is more” theme has been making the news cycle rounds. CALPERS has been pruning their advisor army and expenses for several years now. It has been a lesson a long time in the learning. With so many diverse advisors, CALPERS had to be like the market itself, although with very high expenses. That’s a loser’s game.
Why do folks continue to support active fund managers? Although the odds of superior performance are definitely against them, these investors play the equivalent of the Lottery. They hope for the bigger payoff. There are a legion of sub-par performers, but there are some winners too. Hope is eternal.
I played that game for many decades, but not anymore. KISS works and is far less worrisome and is far less time intensive. Some lessons come slowly. Jason Zweig is spot on-target in this instance. And so are you, Ted.
Best Wishes.