How To Beat The Pros

In this month's edition of the Central Banking Journal, Paul Woolley and Dimitri Vayanos from the London School of Economics provide 10 concrete recommendations for "owners of capital" to "tame the finance monster." While the paper is aimed at pension fund managers and sovereign wealth funds that delegate the execution of their investment mandates to external fund managers, several of the recommendations are absolutely applicable to individuals, whether they're picking stocks or mutual fund managers. For example:

Adopt a long-term approach to investing based on long-term dividend flows rather than momentum-based strategies that rely on short-term price changes. Value strategies need not be buy-and-hold, but do call for patience; (2) Cap annual turnover of portfolios at 30% per annum. Nothing betrays a closet momentum investor more than high and costly turnover [...] and (6) Be wary of new investment products and 'alternative investing' [...]

Source: Motley Fool

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