What's being penalised is diversification itself. Punishment awaits any portfolio that doesn't look like the index, says UBS. Clever stock picking won't deliver outperformance like it once did, not just because it's hard, but because it means allocating cash away from the dominant eight.
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The best businesses we've found are ones where the value of the business actually increases the longer you hold it, not just because of retained earnings, but because the competitive position strengthens over time. That's the opposite of what most people think about when they think about an investment decaying or having a terminal value that you have to discount back.
Vlad Barbalat — Invest Like the Best with Patrick O'Shaughnessy
The best businesses in the world are ones where the reinvestment rate is high and the return on incremental capital is also high. Those are very, very rare. And when you find them, the right thing to do is to do nothing, which is actually very hard to do as an investor because you're paid to do things.
Vlad Barbalat — Invest Like the Best with Patrick O'Shaughnessy
The market will actually tell you when you're wrong. There are a lot of investors who get seduced by a theme and they just hold on forever, waiting for the theme to play out. But the stock market is actually a very efficient discounting mechanism, and if the theme isn't playing out, the stocks will tell you.
Alex Sacerdote — Invest Like the Best with Patrick O'Shaughnessy