“the data clearly pointed to the failure of active management by profit-seeking mutual-fund managers to produce satisfactory results for individual investors. Following the evidence, I concluded that individuals fare best by constructing equity-oriented, broadly diversified portfolios without the active management component. Instead of pursuing ephemeral promises of market-beating strategies, individuals benefit from adopting the ironclad reality of market-mimicking portfolios managed by not-for-profit investment organizations.”

the less-traveled route provides greater opportunity for success

When John Maynard Keynes said, "Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally," he was referring to the tendency of people to conform to conventional thinking and behaviors, even if doing so leads to failure.

In other words, people often prioritize their reputation and the approval of others over taking risks or pursuing unconventional ideas that may lead to success but could also result in failure or criticism. This mentality can lead to a lack of innovation and progress, as people are reluctant to deviate from the status quo.

Keynes was a proponent of challenging conventional thinking and believed that taking risks and pursuing new ideas was necessary for progress and growth. He argued that it was better to take a chance on something new and potentially succeed in an unconventional way, rather than sticking to conventional thinking and potentially missing out on opportunities for success.

Contrarian Investing

• contrarian investors require conviction / rock-solid belief
  • weak-kneed investors sell low and buy high in the face of poor performance
  • knee-jerk contrarian
  • fickle contrarian
• How to build strong belief?
  • reasoning

Traditional actively managed mutual funds is a failure

1. High fees: Swensen criticized the mutual fund industry for charging high fees to investors, which could eat into returns over time. He believed that the fees charged by actively managed mutual funds were often not justified by their performance, as many of them failed to outperform their benchmark indices.
2. Underperformance: Swensen argued that the majority of actively managed mutual funds failed to outperform the market consistently. He cited studies showing that most mutual funds, especially those with high fees, do not beat their benchmark indices over the long term.
3. Conflict of interest: Swensen believed that many mutual fund managers were more focused on maximizing their own income through fees rather than providing the best investment returns for their clients. This conflict of interest could lead to suboptimal performance for investors.
4. Lack of transparency: Swensen was concerned about the lack of transparency in the mutual fund industry, particularly when it came to fees and expenses. He argued that many investors were not fully aware of the costs associated with mutual funds, which could be detrimental to their overall investment returns.
5. Passive investing alternatives: Swensen was a strong proponent of low-cost index funds and ETFs, which passively track market indices. He believed that these investment vehicles offered a more efficient, transparent, and cost-effective way for individual investors to build diversified portfolios.

Sources of Return

🧵1/8 In David Swensen's groundbreaking book, Unconventional Success: A Fundamental Approach to Personal Investment, he outlines the sources of return in investment portfolios. Let's dive into these crucial concepts! 💰📈 #Investment #PersonalFinance

🧵2/8 Swensen identifies six key sources of return: