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My Worst Investment Ever Podcast

Enrich Your Future 04: Why Is Persistent Outperformance So Hard to Find?

Jul 1, 2024
Larry Swedroe, author of 'Enrich Your Future: The Keys to Successful Investing,' discusses why persistent outperformance in investing is challenging. He emphasizes the importance of building a robust asset allocation plan, regularly rebalancing, and sticking with it. Larry shares insights on market bubbles, timing investment decisions, and the complexities of achieving consistent success in investing.
22:53

Episode guests

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Quick takeaways

  • Focus on building a robust asset allocation plan and regularly rebalancing it for successful investing.
  • Abnormal earnings growth tends not to persist in the market due to reversion to the mean, favoring value stocks over growth stocks.

Deep dives

Efficiency of Markets

Markets are highly efficient, making persistent outperformance difficult to achieve. Studies show that less than 2% of active managers consistently outperform benchmarks. Even when some managers show brief success, increased assets lead to reduced performance due to trading costs and decreased market impact. Efficiency in markets often leads to reversion to the mean, challenging active managers' ability to sustain success.

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