Must-Read: Dennis K. Berman and Jamie Heller: Wall Street’s “Do-Nothing” Investing Revolution

Must-Read: Dennis K. Berman and Jamie Heller: Wall Street’s “Do-Nothing” Investing Revolution: “Picking stocks is at heart an arrogant act…

…It requires in the stock picker a confidence that most others are dunces, and that riches await those with better information and sharper instincts. Entire cities—notably New York and London—have been erected in service of this belief. And the image of the clever, dauntless stock maestro is embedded in the American ideal.

Yet there is a simple, destructive idea taking over Wall Street: that stock pickers can’t pick stocks well—or at least well enough for the fees they charge. And even those who do can’t sustain it year after year. In short, the idea of the “active manager” is rapidly losing its intellectual legitimacy to the primacy of the “passive investor” who merely buys an index of shares. That has certainly been true for the last 10 years, when between 71% and 93% of U.S. stock mutual funds either closed or failed to beat their closest index funds…