There are two kinds of investors, be they large or small: those who don’t know where the market is headed, and those who don’t know that they don’t know.
WILLIAM BERNSTEIN, THE INTELLIGENT ASSET
ALLOCATOR (NEW YORK: MCGRAW-HILL, 2001)
CONVENTIONAL investment managers have an interesting view of risk. They are more concerned with the variation between the actual return on the money they manage and the overall performance of the market than they are with preserving the client’s capital. Most use specific benchmarks, such as a particular stock index, to evaluate their performance. If the benchmark stock index is up 20 percent and the managed funds do better, ...