If someone out there can pick winning stocks, then they should be able to pick the losers too, right?

In Forbes Magazine, John Rogers reviews a stock picking test that he implemented.  Essentially, he asked that 71 staff members from his Chicago-based firm, pick 10 stocks that would underperform the 2Q 2009 market.  Of the 71, only 19 succeeded.  So, of 71 people, only 27% were able to purposefully perform worse than the market.  That leaves 73% of the staff members from the sample actually doing as well as the market while under the directive that they should lose to the market.  What does that say about their ability to meet your long-term objectives?

In late 2008 and early 2009, many investors speculated that active managers would fare well due to the high volatility.  Essentially, because stocks of the same asset class were showing increased volatility and lower correlations to each other, the thought was that active managers would really be able to shine.  As we’ve seen, and as Roger’s article shows, even when they try to lose, they can’t do so in any significant manner.

Play your chances as you like, but it seems to us that a professional that claims to be able to pick the right stocks should also be able to remove the wrong stocks.  But that might also imply that the same money managers could perform consistently.  We invite investors to step up and achieve market returns, year-after-year, through a disciplined, and globally diversified multiple asset-class portfolio.