Stocks for the Long Run : the Definitive Guide to Financial Market Returns and Long-term Investment Strategies

20

CHAPTER

FUND PERFORMANCE, INDEXING,

AND BEATING THE MARKET

I have little confidence even in the ability of analysts, let alone un-

trained investors, to select common stocks that will give better than

average results. Consequently, I feel that the standard portfolio

should be to duplicate, more or less, the DJIA.

BENJAMINGRAHAM^1

How can institutional investors hope to outperform the market...

when, in effect, they are the market?

CHARLESD. ELLIS, 1975^2

There is an old story on Wall Street. Two managers of large equity funds

go camping in a national park. After setting up camp, the first manager

mentions to the other that he overheard the park ranger warning that

black bears had been seen around this campsite. The second manager

smiles and says, “I’m not worried; I’m a pretty fast runner.” The first

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(^1) Benjamin Graham and Seymour Chatman (ed.), Benjamin Graham: The Memoirs of the Dean of Wall
Street, New York: McGraw-Hill, 1996, p. 273.
(^2) Charles D. Ellis, “The Loser’s Game,” Financial Analysis Journal, July/August 1975.
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