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  • Writer's pictureWilliam Webster

10,000 hours or (at best) a waste of time?

Updated: Jan 15

In 2008 Malcolm Gladwell talked about 10,000 hours of practice in the sense that the more you do the better you become. This has a certain resonance. The more sportsmen train the better they are. So too in music, art and even the professions.

Whilst Gladwell's theory has its detractors Jim Slater discussed something similar in the "Zulu Principle". Research leads to expertise whether this is in anthropology (Zulus) or investment (shares).

Surely it follows, that by application, you as an investor can beat the market. Even better, a fund manager could do all the hard work giving you superior returns. But overwhelming evidence tells you otherwise.

When I was trading any other dealer was fair game. That’s exactly how fund management works but this time the prey is a financially illiterate public who end up with pension values reduced by one third to one half. Americans call this a turkey shoot.

This will no doubt continue despite FCA investigation. If keeping more of your money is important what can you do?

  1. Minimise costs. Ongoing charges compound horribly and damage your wealth;

  2. Decide on asset allocation. This is the proportion in equities and bonds you hold;

  3. Ask yourself what's better that low cost index funds and similar ETFs?

Remember finding a fund manager who can demonstrate superior performance over a meaningful period is nigh on impossible.

Do it yourself stock selection isn’t the answer either. Any acquired expertise will be eaten by transaction costs. After all what do you know that professional investors don't?

This is the paradox.

Investment doesn't need a huge amount of effort to give you returns that will outperform 90% of fund managers. In that sense 10,000 hours could be better spent.

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