Originally Posted by
TransWorld
This is one of the most common glib beliefs that has been proven wrong. Over decades it is true, but over the next shorter period of time, a person who takes action using this statement can suffer from the “Great Humiliator” of the markets proving them wrong.
It is part of the reason the average investor, managing their portfolio, underperform the markets. They take the wrong actions at the wrong time.
The common glib belief that has been repeatedly proven wrong is that certain funds or financial advisors can reliably beat the market. The issue is one of ascertainment bias. You start with a thousand funds (or financial advisors) and those that do poorly simply lose out in the market to those who do better and fold. The bottom half of the bell-shaped curve simply gets culled. And culled repeatedly. It certainly doesn’t need to have anything to do with superior ability. Substitute 1000 people rolling dice repeatedly for stock picking and you’ll get the same result. Hence the “past performance is no guarantee of future results” disclaimer.
But on a related note…
