Quotes from Charles D. Ellis

Regression to the mean, the tendency for behavior to move toward "normal" or average, is a persistently powerful phenomenon in physics and sociology and investing.) Yes, several funds beat the market in any particular year and some in any decade, but scrutiny of the long-term records reveals that very few funds beat the market averages over the long haul—and nobody has yet figured out how to tell in advance which funds will do it. The

Since most investment managers will not beat the market, investors should at least consider investing in "index funds" that replicate the market and so never get beaten by the market. Indexing may not be fun or exciting, but it works. The data from the performance measurement firms show that index funds have outperformed most investment managers over long periods of time. For

Holding onto a sound policy through thick and thin is both extraordinarily difficult and extraordinarily important work. This is why investors can benefit from developing and sticking with sound investment policies and practices. The cost of infidelity to your own commitments can be very high. An

If investing is all about creativity and making unusual, unconventional, and even unpopular decisions, great investment decisions are best made by individuals taking direct responsibility for the results of their own acts.

The "money game" we still call investment management evolved in recent decades from a winner's game to a loser's game because a basic change occurred in the investment environment: The market came to be overwhelmingly dominated by investment professionals—all knowing the same superb information, having huge computer power, and striving to win by outperforming the market they collectively completely dominate.

Yet Catchings would in just ten years very nearly destroy the firm, proving once again that articulate optimists encouraged by early successes and armed with financial leverage can become hugely destructive.

At least 80 percent of Capital's most important decisions have been 'No' decisions: active, carefully thought-through decisions not to take a specific action. That's why one of the hallmarks of Capital is how seldom it makes major mistakes.

A dearth of fiduciaries willing to place client interests foremost forces individuals to take responsibility for their investment portfolios. In the profit-motivated world of Wall Street, fiduciary responsibility takes a backseat to self-interest. What benefits the stockbroker (commissions), the mutual fund manager (large pools of assets), and the financial advisor (high fees) injures the investor. When profit motive meets fiduciary responsibility, profits win and investors lose. Understand

The overwhelmingly large number of investors should seek membership in the passive management club. This group, instead of scratching for a small edge in today's extraordinarily efficient markets, wisely accepts what the markets deliver. Charley makes a compelling case for the market-matching strategy of investing in index funds, touting their simplicity, transparency, low cost, tax efficiency, and superior returns. Winning

Tax-efficient index funds garner a substantial edge over tax-inefficient actively managed mutual funds.

The core principles of successful investing never change—and never will. In fact, when short-term data appear to be most challenging to core principles is exactly when those principles are most important and most needed. Sure the companies, markets, and economies come and go, but the core principles remain the same.

Faced with information that contradicts what they believe, people tend to respond in one of two ways. Some ignore the new knowledge and hold to their former beliefs. Others accept the validity of the new information, factor it into their perception of reality, and put it to use.

Investment management, as traditionally practiced, is based on a single core belief: Investors can beat the market and superior managers will beat the market.

After adjusting the comparison of index funds to actively managed funds for survivorship bias, taxes, and loads, the dominance of index funds reaches insurmountable proportions. Once

An active manager must overcome the drag of about 3.25 percent in annual operating costs. If the fund manager is only to match the market's historical 9 percent return, he or she must return 12.25 percent before all those costs. In other words, to do merely as well as the market, an active fund manager must be able to outperform the market return by over one-third or 34.1 percent!5

Keeping skills up to date requires the investment of time, effort, and perhaps even money for tuition. But it's worth it for an extra decade of productive activity.

TIME IS ARCHIMEDES' LEVER in investing.    Archimedes is often quoted as saying, "Give me a lever long enough and a place to stand, and I can move the earth." In investing, that lever is time. (And the place to stand, of course, is a firm and realistic investment policy.)

How can institutional investors hope to outperform the market... when, in effect, they are the market?

Talented people want recognition and respect for their skills and their achievements even more than they want money. They need and appreciate acceptance and respect.

Doing thousands of little things, day after day, inching along as consistently as you can, in the right direction as best you can tell, is management—and motivating or inspiring everyone to work together for long-term purpose is leadership.

Standard & Poor's Dow Jones Indices published a statistical analysis in 2016 detailing the dismal record of "active" portfolio managers: As is typically the case, about two-thirds of active large-capitalization managers underperformed the S&P 500 large-cap index during 2015. Nor

Nor were managers any better in the supposedly less efficient, small-capitalization universe. Almost three-quarters of small-cap managers underperformed the S&P Small-Cap Index. When

When S&P measured performance over a longer time period, the results got worse. Over 80 percent of large-cap managers and almost 90 percent of small-cap managers underperformed their benchmark indexes over a ten-year period through December 2015.

And if you don't believe me or even Charley, remember that Warren Buffett, perhaps the greatest investor of our time, has opined that all investors would be better off if their portfolio contained a diversified group of index funds.