Latest: Dan Solin on CNBC's Power Lunch - Sept 8, 2009
Dan Solin Reveals Wall Street’s Favorite Scam: "What
Wall Street does is package luck and sell it as skill.”
Smartest
Book Author Reveals Active Management Folly
September 8, 2009
IFA’s Dan Solin blew a gaping hole through the myth that active managers
add value to an investor’s portfolio.
In a September 8, 2009 CNBC debate between Solin, IFA Senior Vice President
and best-selling investment book author (Solin’s "The
Smartest Retirement Book You'll Ever Read" was just released) and
Doug Kreps, principal and managing director at Fort Pitt Capital Group an
active manager, Solin revealed important data about the ongoing benefits
of diversification — even in the face of the global market downturn
suffered in 2008.
"Even though portfolios were decimated, diversification worked fine," said
Solin. "Bonds didn't lose any money, and if you had a globally diversified
portfolio of stocks, you probably lost less money than you would have lost
if you didn't. It doesn't protect you from overall market declines, but it
works better than the alternative."
Kreps concurred with Solin’s regard for the value of diversification,
but asserted that an active manager could effectively guide an investor through
diversification and add value.
Armed with data from a comprehensive study that covered a 32-year time period
and the results of more than 2,100 active managers, Solin refuted Kreps’s
argument and cited the results of “False Discoveries in Mutual Fund
Performance,” the bombshell discovery which shows that 99.4% of the
active fund managers were shown to lack any genuine stock-picking ability.
Referencing the recent Dalbar
study of investor behavior, Solin revealed
that an investor in a globally diversified, passively managed index portfolio
would have earned at least 400% higher returns than the average investor
who relies on speculation and performance chasing behaviors.
"What Wall Street does is package luck and sell it as skill. The real
data shows that passive management, actually in the last 20 years has achieved
a greater return than active management."
Solin’s summation of the importance of global diversification and
the pertinent data that reveals the parasitic nature of active managers dovetails
IFA President and Founder Mark Hebner’s recent Position
Statement on Investing.
Dan has appeared on CBS’s The Early Show, Fox Television’s The
O’Reilly Factor and Fox and Friends, MSNBC’s Weekend
Economic Review, CNN’s Money, and Bloomberg Television.
Dan is a frequent speaker on investment-related topics and presents
before large corporate audiences and topic-oriented interest groups.
He has testified
before a congressional subcommittee investigating the fairness
of the mandatory arbitration system imposed on all investors by the
securities industry.
Dan is a Senior Vice President for Index Funds Advisors (IFA). Dan is
a Registered Investment Advisor Representative (Series 65), and he resides
in Bonita Springs, Florida.
Patricia is a graduate of California State University, Fresno. She also
has Certificate of Legal Studies from U.C.L.A.
Her employment history includes serving as a Manager with Price Waterhouse
in San Francisco and as President and Chief Operating officer of
a manufacturer.
