4 Feb 2020
In 1973 economist Burton Malkiel, a Princeton University professor, claimed that “a blindfolded monkey throwing darts at the stock listings” could do as well as an investment professional.
I am terrible at darts, so I can say with a high degree of certainty that a blindfolded monkey would give me a good thrashing. But is there any merit in the statement that a completely random approach to stock picking would deliver a better outcome than an analyst poring over company reports?
Inconveniently, there is an element of truth in Malkiel’s controversial comment. A 2018 study by S&P Dow Jones Indices showed that most active stock managers failed to beat their benchmark targets over the previous one-year, five-year,10-year and 15-year periods; a key driver of their inability to consistently outperform the benchmark over the longer term was fees.
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