Hans Blake, CFA, CPA

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Reading Time: 2 minutes On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on the paradox of skills. This is the third issue that makes Alpha become elusive. Larry explains two thoughts that need to be considered. First, most people fail to understand the difference in competition. In a one-on-one competition, the successful competitor wins, or outperforms, by a significantly higher percentage than his opponent.  The collective wisdom of the market, however, is the tougher competition. Second, Larry expounded on the increase in education within financial institutions. Interestingly, this increase in skill level is needed to generate Alpha. Larry states that this is a big problem consequently for the active world. At Intelligent Investing, we believe that no advisor can consistently deliver outperformance. As Nick Murray says in one of his books, “Adam and Eve were goal-focused investors…until the serpent told them they could be–with just a little guidance from him–smart enough to outperform. Remember, outperformance is the apple. Don’t bite into it. To learn more about the other reasons Larry believes the Quest for Alpha is so difficult, visit out blog section at investedwithyou.com/blogs We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Since joining the Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing. In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com. Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp. Larry holds an MBA in finance and investment from NYU, and a bachelor’s degree in finance from Baruch College.

Podcast: Play in new window | Download

Reading Time: 2 minutes On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on how the shrinking pool of victims makes it difficult to outperform. In his book Why Alpha is Becoming More Difficult, this is the second issue. Referencing William Sharpe, Larry notes that if one investor outperforms the market, consequently somebody else has to underperform. Larry points out the high percentage of trading done by individual investors in the 30s, 40s, and 50s.  Today, more trading is done by institutional investors, high-frequency traders, etc. Two problems have arisen because of this switch. First, people are abandoning active management due to its bad history. Second, and consequently, those who have underperformed are abandoning active management. Larry states that there’s not enough alpha to go around, and he asks the question, “Who is left to exploit?” As the pool shrinks, it is becoming harder and harder to outperform. At Intelligent Investing, we believe that no advisor can consistently deliver outperformance. As Nick Murray says in one of his books, “Adam and Eve were goal-focused investors…until the serpent told them they could be–with just a little guidance from him–smart enough to outperform. Remember, outperformance is the apple. Don’t bite into it. To learn more about the other reasons Larry believes the Quest for Alpha is so difficult, visit our blog section. We’ll be interviewing Larry on several podcasts regarding markets, passive investing, and diversification, so be sure to subscribe to our Intelligent Money Minute podcasts. Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has since authored seven more books.

Larry Swedroe Bio

Since joining the Buckingham Strategic Wealth in 1996, Chief Research Officer Larry Swedroe has spent his time and energy educating investors on the benefits of evidence-based investing. In his role as chief research officer and as a member of the firm’s Investment Policy Committee and Board of Directors, Larry regularly reviews the findings published in dozens of peer-reviewed financial journals, evaluates the outcomes and uses the result to inform the firm’s formal investment strategy recommendations. Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television shows airing on NBC, CNBC, CNN and Bloomberg Personal Finance. Larry is a prolific writer, contributing regularly to multiple outlets, including Advisor Perspectives and ETF.com. Before joining Buckingham, Larry was vice chairman of Prudential Home Mortgage and senior vice president at Citicorp. Larry holds an MBA in finance and investment from NYU, and a bachelor’s degree in finance from Baruch College.