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Winning the Loser’s Game, 6th edition: Timeless Strategies for Successful Investing by Charles Ellis

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CHAPTER 3BEATING THE MARKET

THE ONLY WAY ACTIVE INVESTMENT MANAGERS CAN BEAT THE market, after adjusting for market risk, is to discover and exploit other active investors’ mistakes.

Of course, in theory it can be done, and it has been done by many investors some of the time. However, very few investors have been able to outsmart and outmaneuver other investors often enough and regularly enough to beat the market consistently over the long term, particularly after covering all the costs, including the taxes, of “playing the game.” Ironically, the reason so few investors do better than the market is not because they lack skill or diligence, but because the markets are so dominated by investing experts who are so very capable, so well informed ...

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