Staying Fit
William J. Bernstein is an author, investment adviser and retired neurosurgeon who takes a scientific approach to managing money. He's an eloquent proponent of modern portfolio theory, which holds that you're better off investing in low-cost index funds and allocating your money across broad types of assets — stocks, bonds, international securities and cash. His sixth book, Rational Expectations: Asset Allocation for Investing Adults, was published in 2014.
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Q. How would you define an adult investor? Are most people capable of adult investing?
A. An adult investor is one who has approached the subject as any well-educated person would approach a serious field of study — by acquainting themselves with basic empirical and theoretical facts. Some of the prime things you'll learn are that most outperformance or underperformance by stock pickers and market timers is due to luck and not skill.
While some strategists make occasionally lucky-timing calls, there is no one in the history of investing who has reliably predicted market direction. Past superior performance rarely persists, and the most important predictor of future performance is fees and expenses, not investing genius.
In plain English, just as adults know there is no Easter Bunny or Santa Claus, investing adults know there is no Stock Picking Fairy or Market Timing Fairy.