Transcripts

Larry Swedroe:
That seems like an attractive proposition, but all the academic evidence shows that that's utter nonsense. If eighty percent or so of the best investors in the world fail, why do individuals with far less resources think that they're likely to succeed?

Larry Swedroe, author of the book Wise Investing Made Simple, says when you get past the hype and look at the research, buying and selling your own stocks is usually a bad idea.

The best example I could give you is a study done by Brad Barber and Terrance O'Dean - they looked at the trading of individual investors and they found that the more people traded, the worse their results were. They also looked at men and women investors. And while the stocks that women picked did no better than the stocks that men picked, women actually did better because they traded less.

But some people seem to do well picking stocks. So what if you just follow what they do? Larry says that's a bad strategy too…

Let me give you a great example, which is the story of Bill Miller at Legg Mason. Here's a guy who beat the market, I think it was fifteen years in a row. The last two years he's gotten slaughtered. Was Bill Miller a genius who suddenly got stupid - or was he lucky and he got unlucky? Hard to know, isn't it?

Tomorrow, other myths about investing that a lot of people believe - I'm Mike Carruthers and that's Something You Should Know.