Don't Believe Me? How About Some of These Folks?

“More often…the conclusions (which support active money management) can only be justified by assuming that the laws of arithmetic have been suspended for the convenience of those who choose to pursue careers as active managers.”

                                                        William F. Sharpe, Nobel Laureate in Economics, 1990

                                                        “The Arithmetic of Active Management,” Finanacial Analysts’ Journal, Vol.

                                                         47, No. 1, January/February 1991

“If there are 10,000 people looking at the stocks and trying to pick winners, one in 10,000 is going to score, by chance alone, a great coup, and that’s all that’s going on.  It’s a game, (active money management is) a chance operation, and people think they are doing something purposeful…they’re really not.” 

                                          Merton Miller, Nobel Laureate in Economics.

                                                        Transcript of the PBS Nova special, “Thye Trillion Dollar Bet,” 2000

“Santa Claus and the Easter Bunny should take a few pointers from the mutual-fund industry.  All three are trying to pull off elaborate hoaxes.  But while Santa and the bunny suffer the derision of eight-year-olds everywhere, actively managed stock funds still have an ardent following among otherwise clear-thinking adults.  This continued loyalty amazes me.  Reams of statistics prove that most of the fund industry’s stock pickers fail to beat (the S&P 500).”

                                            Jonathan Clements, “Only Fools Fall in…Managed Funds?”

                                                       The Wall Street Journal, September 15, 2002

“Properly measured, the average actively managed dollar must underperform the average passively managed dollar [FSBW’s method], net of costs.”

                                          William F. Sharpe, Nobel Laureate in Economics, 1990

                                                        “The Arithmetic of Active Management,” Financial Analysts Journal, Vol. 47, No. 1,

                                                         January/February 1991

“Investors, both individual and institutional, and particularly 401(k) plans, would be far better served by investing in passive or passively managed funds [again, FSBW’s method] than in trying to pick more expensive active managers who purport to be able to beat the markets.”

                                                             Edward S. O’Neal, Ph.D., Assistant Professor of Finance, Babcock Graduate School of

                                                             Management, Wake Forest University