The Year of the Stock Picker? Malkiel Scoffs
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Tuesday, June 06, 2017

The Year of the Stock Picker? Malkiel Scoffs

The author of A Random Walk Down Wall Street is publicly shooting down the idea that the worm will turn on index funds and that this year (or any other) will be "the year of the stock picker."

Burton Malkiel again took to the pages of the Wall Street Journal to defend index funds and bemoan active managers' collective "dismal record." Malkiel picks up on new "impressive support" for index funds from a new S&P report, and he uses it to repeat the classic mantra that investment performance (well, relative performance anyway) "has to be a zero sum game", except with costs "the game becomes negative-sum."

Malkiel also rebutted, again, a 2016 AB report attacking passive investing as "worse than Marxism." Malkiel notes that active managers have an incentive to help keep markets efficient and liquid, despite the continuing rise of passive managers.

"Americans have far too much active management today, not too little," Malkiel writes. "If anything, the stock market is becoming more efficient — not less so — despite the growth of indexing."

A famed economist, Malkiel currently serves as chief investment officer of Wealthfront, one of the bigger independent roboadvisors in the business. Like most roboadvisors, Wealthfront builds portfolios out of indexed ETFs.

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