During this holiday-shortened week rather than bringing you fresh links I wanted to highlight what I call “criminally overlooked blog posts.” Every blogger will tell you that the correlation between what they think is a good blog post and what  gains traction is close to zero. That is why I want to revisit some posts that are worth a second (or first) look. I asked an esteemed panel of bloggers to send me links to blog posts, their own or others, that got overlooked. All of today’s post touch on the topic of passive (and/or active) investing. Stay tuned each day this week for a fresh batch of posts.

“What you choose as a measure of performance—rat tails or dead snakes in these examples—is what you end up getting. Tell a portfolio manager that they will get paid on Sharpe Ratio, and you can bet that their Sharpe will improve, relative to other measures of investing success. This can become a problem.” by Patrick O’Shaughnessy from “When Measures Become Targets: How Index Investing Changes Indexes.”

“There are useful parallels between investing and poker, but investing is not a zero-sum game, dumb money is not the primary driver of returns for most strategies, and the “suckers at the poker table” is not a useful analogy for most long-term investors.” by Druce Vertes from “Active vs. Passive Investing and the “Suckers at the Poker Table” Fallacy.”

“We already know that before costs the typical actively managed dollar and the typical passively managed dollar earn the same return,  but that after costs the typical actively managed dollar underperforms on account of higher costs. This is a mathematical truism commonly known as the arithmetic of active management or the cost matters hypothesis. The SPIVA is simply a noisy repeat measurement of this mathematical fact.” by Sam Lee from “The Misuse of Aggregate Active v. Passive Comparisons.”



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