Myth Busting, Popular Delusions, and the Variant Perception

maggio 20, 2020

Myth Busting, Popular Delusions, and the Variant Perception

Consilient Observer

Myth Busting, Popular Delusions, and the Variant Perception

maggio 20, 2020

We address four myths or popular delusions in the investment industry:

Short-termism is rampant and deleterious: We hear this argument made a lot but often without concrete evidence, so we critically examine some of the claims to see if they hold up;
Dividends play a large role in equity returns over time: We show that price appreciation is the only source of investment return that increases accumulated capital;
Investing in money-losing companies is a bad idea: This is too simplistic, as some money-losing companies may still have attractive economics; and
The rise of indexing has made it easier to be an active manager: If the investors who have turned to indexing tend to be less skillful, the remaining investors are left competing against stronger competition, making it harder to generate alpha.

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