Bad luck Quote by Eugene Fama
“The problem that people don't understand is that active managers, almost by definition, have to be poorly diversified. Otherwise, they're not really active. They have to make bets. What that means is there's a huge dispersion of outcomes that are totally consistent with just chance. There's no skill involved it. It's just good luck or bad luck.”
About This Quote
Source Article: Journal of Portfolio Management, 1992
Active managers must concentrate bets, leading to high outcome variance that is largely random, not skill‑based.
In simple terms: Active management is mostly luck.
Key Takeaway
Beware of over‑reliance on active managers.
Themes
investment
risk
efficiency
finance
Mood
cautious
analytical
Type
financial
educational
When to use this quote
- asset allocation
- risk assessment
- investment strategy
Key Concepts
Portfolio theory
randomness
Questions to Reflect On
- Can investors reliably identify skillful managers?
- What role does diversification play in active strategies?
A Different Perspective
Skill may be overstated in active management.
