Sometimes our clients come on board with a few bad habits learned from prior investment experiences. They may be focusing on events outside of their control, or they may have confused strategy and outcome (meaning they don’t recognize that their good returns were mere luck). In a recent video from AQR, founding principal John Liew draws a clear difference between good and bad investors. We love his definitions for each, and we’ll continue our work converting more people to good investors. Click here for the video.

Many great discoveries are made by accident, and it turns out that Odds On: The Making of an Evidence-Based Investor is great for kids. Having one of the few advanced reader copies and curious to get some get a child’s perspective, I gently encouraged my 12-year-old daughter, Kathryn, to read it. She certainly enjoys reading, but business books are not her usual fare. While the rest of the family was watching Peyton Manning win Super Bowl 50, Kathryn was making deposits into her financial memory bank.

The next morning, while driving carpool, I asked her if she was enjoying the book. To my amazement, she had already completed it! To quote Kathryn: “I have a better understanding of what investing is…the old way is based on guessing and the new way is based on evidence.” While stated simply, it’s a powerful message that she’s sure to remember.

We can’t help but point out this recent (and expensive) full page advertisement from Fidelity about their belief in active management. Though you won’t hear us say that active managers can’t possibly win in the short-term, we certainly know that it’s hard to identify the winners in advance.

The 15-year data on the odds of active management (as shown in this graph) indicates that we’re far better off adopting a low-cost, evidence-based approach and sticking to it over long periods of time. Doesn’t that sound prudent?