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RVB's Market Musings

What began here as an avenue to interact and learn has far exceeded those goals.

If you are a prospective employer, please consider this site a place where you can see my passion for investing...

Monday, January 09, 2006

Investment Professionals

While doing the dishes today, I was thinking more about my first interview for an Equity Analyst summer internship role with a fairly well-known investment company. During this interview, it became clear after 10 minutes that I was not going to go any further in the interviewing process. Why? I lack the pedigree for a typical investment analyst. In fact, the interviewer basically came right out and said it bluntly -> which I respect. Those who know me personally know that I am blunt, and sometimes brash but always with good intentions. I'm not big on ego - I just love investing and learning about investing. But - much like those who have decided that hedge funds are their investment vehicle of choice, I have little patience for investment professionals who are arrogant and don't provide any value to clients. Unfortunately, I believe that that number is a very high percentage of the total in the business.

I know. Before I decided to make this career change, I was a client. A frustrated one at that. But, it's not all these professionals fault. For one, the rules guiding mutual funds almost always prevent them from outperforming the S&P500, which can be bought with ticker SPY and paying a mere 0.28% yearly fee. There are, however, a few great exceptions such as Bill Miller's fund at Legg Mason. Mr. Miller receives alot of press for having beat the S&P500 for 15 straight years. He deserves every bit of it, and probably more. Secondly, most professionals have all the same credentials. Huge numbers have an MBA from Wharton, Harvard, NYU, or the University of Chicago. Many are CFA charterholders. There are even many in the business for which both sentences fit.

The problem is, at what point did these people start thinking differently? The CFA exams test the same things, year in, year out. MBA classes don't really change over time. In fact, with so many of the professionals coming from the same 4 or 5 "top" schools, how much variation is there in what these students know? So you have these "pedigree" people - in fact, many of them who had prior experience in the field before getting an MBA. I sometimes think that it is ironic that I plan to become one of these people. This is not necessarily because I believe it's necessary to beat the markets. In fact, Marketocracy has proven to millions that these designations can be more of an obstacle rather than helpful. Said one proven self-taught investment veteran,
"I think artfully applied discipline rather than secret tools make more money in the long run. The industry has a lot of CFA/MBA's who all went to top notch schools, mostly all learned from the same classic textbooks and so how can anyone have excellent comparitive performance if the are all using the same methods and screening tools? To make real money takes thinking outside the box. It's science, math and art combined. Every engineer can build a great race car but when that tools in put into the hands of an artful driver that can think outside the box, magical things happen. You have to really "feel" the market and not be a robot. If you don't believe that a computer can replace you all!"

This was replied to by a top 10 member in the history of Marketocracy with,
"I do agree - and the stats show - that all those insitutionalized MBAs will struggle to outperform. Trust me, there is nothing institutionalized about my research methods, and I'm so much outside of the box that I sometimes need Lassie to help show me the way home."

So, while I am focused on, and do find value in the traditional methods, in the long run I am completely convinced that my different background and open-mindedness to different investing methods and tools will be what can set me apart. And I want to stipulate that I do not mean this in an arrogant way whatsoever. I work very, very hard at what I do because I love it. And I have the motivation of a former frustrated client of those who were just simply "the pedigree".


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