The Ignorant Investor

It could be because I've become hostile to the idea of selecting stocks instead of buying index funds, but I read this from Money Magazine's Penelope Wang with a sense of weary skepticism:

Just as growth managers Helen Young Hayes and Tom Marsico were hailed by investors and the financial press, including Money Magazine, in the 1990s, value managers are hot today.

Take Joel Greenblatt, a hedge fund manager who teaches finance at Columbia University. His book "The Little Book That Beats the Market," which outlines a basic formula for picking value stocks, soared to the top of the bestseller lists after receiving fawning reviews.

Soon to hit the shelves is a follow-up, "The Little Book of Value Investing," a primer written by Christopher Browne, co-manager of the Tweedy Browne funds . . . Browne, whose company once did stock trading for legendary value investor Benjamin Graham, writes, "I like to think of Tweedy as the Vatican City of value investing, and although we do not have a pope, we have great cardinals and bishops."

There's nothing inherently bad about taking the value approach to stock picking, so long as you understand that the rest of the market will often turn to picking stocks by judging which ones will most attract a crowd even when the numbers look bad-i.e., "growth stocks" or "momentum investing"- and that you'll have to watch while growth investors trumpet their huge returns (remember the late 1990s?) . Value managers now argue that the value approach has been proven correct, but as always what we see is a turning of the great wheel. The yin and yang of investing in equities, ever swirling. Today value, tomorrow growth. Then back to value, then growth. That's why many investors buy both growth and value funds, so they always have a horse pulling the cart and don't have to worry whether they've got the timing right.