Index Investing: Refusing to Believe in Magic
…building a portfolio around index funds isn’t really settling for average. It’s just refusing to believe in magic.
A number of smart people are involved in running hedge funds. But to a great extent their efforts are self-neutralizing, and their IQ will not overcome the costs they impose on investors. Investors, on average and over time, will do better with a low-cost index fund…
No matter where we look, the message of history is clear. Selecting funds that will significantly exceed market returns, a search in which hope springs eternal and in which past performance has proven of virtually no predictive value, is a loser’s game.
~John Bogle, Founder of Vanguard
Economists, when faced with a conflict between theory and evidence, discard the theory. Stockbrokers discard the evidence.
~Andrew Smithers and Stephen Wright, authors of "Valuing Wall Street"
I own last year’s top performing funds. Unfortunately, I bought them this year.
After taking risk into account, do more managers than you’d see by chance outperform with persistence? Virtually every economist who studied this question answers with a resounding “no.”
~Eugene Fama, Professor at University of Chicago
Why does indexing outmaneuver the best minds on Wall Street? Paradoxically, it is because the best and brightest in the financial community have made the stock market very efficient. When information arises about individual stocks or the market as a whole, it gets reflected in stock prices without delay, making one stock as reasonably priced as another. Active managers who frequently shift from security to security actually detract from performance (vs. an index fund) by incurring transaction costs.
~Burton Malkiel, Professor, Princeton
It is not easy to get rich in Las Vegas, at Churchill Downs, or at the local Merrill Lynch office.
~Paul Samuelson, Nobel Prize Winning Economist
You'll find more quotes here or here from Brendan at Ross Asset Advisors.