David’s Articles

David has been writing and publishing since 2006.  

This post was written and published prior to September 2023 when David and his prior firm, Family Capital Strategy, merged with Greycourt.  Views expressed reflected David’s personal views at the time and do not necessarily reflect the views of Greycourt.  Posts and information may be out of date and should not be relied upon for investment advice.

Beating the Market or Winning the Loser’s Game?

Dec 15, 2015 | Family Wealth

As we come into the end of 2015, volatility is back in the equity markets and near-panic conditions exist in some parts of the high yield market.  Active managers are likely to under-perform again this year.  With this confluence of factors, it seemed appropriate to look back at Charles Ellis’s seminal work , Winning the Loser’s Game,

Ellis, a long time investment consultant, and an excellent author dives deeply into the market and whether or not it is even possible to achieve market beating performance.

Here are a few snapshots from his work:

  • Four possible ways to beat market:
  • market timing
  • asset selection
  • changes in portfolio structure/strategy
  • long-term investment philosophy
  • For most investors the most important thing is to be invested.  
  • Paradox – Funds are often being managed with their purpose and objectives being misaligned on the time dimension
  • Appropriate investment policy can therefore be the most important way to achieve superior investment results
  • 6 questions any investor should ask before selecting a manager
  • What are the risks of an adverse outcome?
  • What are the emotional reactions to an adverse outcome?
  • How knowledgeable is the investor?
  • How important is the portfolio to the overall financial position?
  • Legal restrictions?
  • Any unanticipated consequences that could arise from fluctuation of value?
  • “time is archimedes’ lever in investing.”
  • the real risks in the long run are the risks of inflation and excessive caution
  • the great secret for success in long term investing is to avoid serious losses
  • policy is the most effective antidote to panic
  • Policy is to establish useful guidelines that are appropriate for your objectives and the realities of the markets
  • First understanding of your objectives and tolerance for risk
  • spending decisions should most definitely be governed by investment results
  • problem definition and problem solving should not be delegated to investment managers
  • “don’t confuse brains with a bull market”
  • a few simple tests of investment policy
  • Is the policy carefully designed to meet your real needs and objectives?
  • is the policy written so clearly and explicitly that a competent stranger could manage the portfolio and conform to your intentions
  • would you have been able to sustain commitment to the policies during the markets we have experienced over last 15, 20, 30, 50 years?
  • would the manager have been able to maintain fidelity over the same periods
  • would the policy have achieved our objectives?
  • Managing managers
  • believes in concentrating with 1-2 managers
  • know your objectives
  • do not expect more than they can deliver
  • select based on competence


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Nashville, TN