Eugene Fama speaks, so we listen

Eugene Fama, the living legend of Modern Portfolio theory, hits on some key points that every investor should know at recent IMCA conference.

- Avoid active managers and their high fees

“Active management is a zero-sum game before cost, and the winners have to win at the expense of losers.”

- Avoid any strategy that self-reports performance (e.g. Hedge Funds)

“I can’t figure out why anyone invests in active management, so asking me about hedge funds is just an extreme version of the same question.”

- The market appropriately prices assets - concentrate on what you can control, Costs and Taxes

“Since I think everything is appropriately priced, my advice would be to avoid high fees. So you can forget about hedge funds”

- Federal Reserve Tapering is a non-issue for the long-term investor

“The Fed is using one kind of bond to buy another kind of bond. What’s the big deal, and why is anyone taking the Fed seriously?”