If Active Investing Is the Loser’s Game, What’s the Winner’s Game?
Active investing—defined as individual security selection and market-timing—has long been shown to be a “loser’s game.” Charles Ellis, in his classic book, Winning the Loser’s Game, demonstrated that while it’s possible to outperform the market, the odds are so poor that it’s not prudent to try. The question, then, is: What is the prudent “winner’s game” for investors?
A sound investment strategy should be grounded in peer-reviewed academic research, not opinions or anecdotes. The overwhelming evidence is that markets are highly, though not perfectly, efficient. This means that most information is already reflected in prices, making it extremely difficult for active managers to consistently outperform after costs….
