Investment Gurus Don't Even Follow Their Own Advice

from the what-chance-do-you-have? dept

There are all sorts of well known investment strategies out there, but it's often difficult to find anyone who sticks to them -- even those who are famous for pitching those investment strategies, apparently. The Wall Street Journal surveyed a number of people famous for their investment strategies and found plenty willing to (somewhat sheepishly) admit they don't follow the strategies themselves, often proving that emotion overcomes rational thinking when it comes to investments:

• Harry Markowitz, winner of a Nobel Prize in economics, in part for his work on the relationship between risk and return admits that, rather than pay attention to any of that in his personal investing: "I visualized my grief if the stock market went way up and I wasn't in it -- or if it went way down and I was completely in it. My intention was to minimize my future regret. So I split my contributions 50/50 between bonds and equities."
• John C. Bogle, founder of the Vanguard funds, and the high priest of constantly "rebalancing" your portfolio, to sell what's gone up and buy more of what's gone down, doesn't actually do that himself: "I think rebalancing makes a substantial amount of sense. I don't rebalance... I leave it alone. I have not touched my asset allocation since March of 2000."
• Don Phillips, managing director at research firm Morningstar Inc., who pushes people to put certain non-equity investments, like treasuries and REITs, into tax-deferred retirement accounts, hasn't actually done so himself. "I still think of my retirement assets as meeting long-term goals and have trouble putting anything but equities in them, even though I know that I should think of my portfolio as a whole, not as pools of money tied to independent goals."
• And then there's Burton Malkiel, the Princeton economist who wrote A Random Walk Down Wall Street, which has convinced many, many people to put all of their money in index funds, doesn't do that himself: "Actually, I have a quarter to a third of my money in individual stocks and actively managed funds.... It's not necessarily because I think I'll be any better off than with indexing, but I still want to buy a few individual stocks because it's fun."

That's not to say that any of the investment strategies proposed by these guys is necessarily bad. It just shows how incredibly difficult it is to be disciplined enough to actually follow them.

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