Peter Lynch, a very successful professional investor, is astonishingly scathing about his profession. His number one rule is to stop listening to the professionals! He is convinced that ordinary people ‘using the customary 3 per cent of the brain’ can perform just as well, if not better, than the average ‘expert’.
He really believes that there are a lot of dumb investing decisions made by those who are paid large salaries and bonuses to look after other people’s money.
On the other hand the amateur has many built in advantages that could lend to market out-performance – and out-performance of the professionals.
The professionals face a number of constraints that the amateur can avoid. There are social and political obstacles stopping fund managers being different from the crowd. If they take a chance and it turns out badly then they will be blamed – it is better for them to go along with the crowd. Then, there are all the institutional rules and regulations that prevent rational investing:
Lynch and Warren Buffett use this term to describe professional fund managers, who they think fail to qualify as investors as they understand the word.
What is it that these pe
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