Conclusion: At Least Managers Are Interesting

Earlier in this chapter I wrote, “It's almost impossible to express how difficult it is to identify truly outstanding portfolio managers in time to profit by investing with them.” I repeat it here because it's a truth that investors have a tough time internalizing. We remember vividly the few outstanding managers we've invested with, but the many disappointments tend to disappear into the mists of the past.

Even the best institutional investors make many, many manager mistakes, and at the end of the day they will be lucky if the mistakes don't outweigh the successes. An under-resourced family has little chance of succeeding.

On the other hand, working with managers is an interesting way to spend time—far more interesting than, say, poring over mean variance optimization models. So if you love working with managers, be my guest. But be honest with yourself and your family's money. If you find, as is likely, that on a net basis your managers are subtracting value from your portfolio, size active management down and passive management up.