Greed & Chasing Alpha Makes It Difficult to Outperform

Reading Time: 2 minutes On today’s Intelligent Money Minute, we’ll interview Larry Swedroe on how greed and chasing alpha makes it difficult to outperform. We’ll discuss how there has been a change in the landscape due to the increase in money chasing. Larry points out the fact that there were almost no hedge funds in the 1950s. However, he talks of the “Golden Era” of hedge funds around the turn of the century. There was a growing increase in the number of mutual funds and the generating of big alpha. As money began pouring in, much of alpha began to lose value. This was due to the small amount of money, and factors not being well-known or exploited. Consequently, today much of alpha has been converted into beta and eliminated. This over-crowding resulted in more money, more competition, and fewer victims. As a result, these factors ultimately raised hurdles for active managers. At Intelligent Investing, we believe in the importance of independence and not chasing after alpha. We understand that independent bookstores and independent coffee shops have a different feel from Barnes and Noble and Starbucks. Independent financial firms have a different feel from big-name investment firms. We are locally owned and operated boutique wealth management firm, and feel this keeps us close to those we serve. 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.