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Consilient Observer
May 20, 2020

Myth Busting, Popular Delusions, and the Variant Perception

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May 20, 2020

Myth Busting, Popular Delusions, and the Variant Perception

Consilient Observer

Myth Busting, Popular Delusions, and the Variant Perception

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May 20, 2020


We address four myths or popular delusions in the investment industry:

  • Short-termism is rampant and deleterious: We hear this argument made a lot but often without concrete evidence, so we critically examine some of the claims to see if they hold up;
  • Dividends play a large role in equity returns over time: We show that price appreciation is the only source of investment return that increases accumulated capital;
  • Investing in money-losing companies is a bad idea: This is too simplistic, as some money-losing companies may still have attractive economics; and
  • The rise of indexing has made it easier to be an active manager: If the investors who have turned to indexing tend to be less skillful, the remaining investors are left competing against stronger competition, making it harder to generate alpha.
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