Discipline is the Key

In the book, "What works on Wall Street", author James O'shaughnessy found that one of the reason why academics adopted the flawed "random walk" hypothesis of the stock movements is because of inconsistent methodologies used by fund manages themselves. Fund managers do not adopt a well-defined strategy and stick to it, they tend to go with the flavor of the month stocks, to adopt new paradigms when they see fit, to rebalance portfolios constantly and generally move about in a random manner. By analyzing the returns of fund managers academics were unable to find any managers who had consistently been able to get far above average results in a statistically significant manner. They erroneously concluded that it is the market that is rando. In reality the market does reward certain approaches over time, but none of the market professionals studied ever stuck to any of these approaches. Rather than random stocks, it is clear that it is the investors who are random. 

The one factor that unites all of the great investors is that they have a simple formula that is applied consistently over time and can be easily stated in a book. As complicated as Warren Buffett's methods are, you could write a book about him and state with great precision how he goes to work analyzing stocks, in fact many books about him have indeed been produced. Buffet states that, to be a successful investor does not require one to have a high IQ but rather it requires two things:

A. A strong intellectual framework on which to base your decisions;

B. Not letting your emotions corrode the framework. 

The 80% of managed funds that fail to beat the market do so because of complicated and ever changing strategies, or lack of strategies as may be the case. To paraphrase James, "If you can't write down and explain your technique on a piece of paper, you don't have a technique."

There are approaches that consistently beat the Market!

It is important to adopt an approach that works, and stick to it. The reason why most investors fail is that they go chasing better results elsewhere and tend to move out of sectors just when they are about ready to start making big gains. 

Today's equities markets change fast. Factors are influencing stock and bond prices today that we could not even have conceived of just a few years ago. Yet investing concepts and resources that we have been taught to use for decades have not changes, and they no longer work. This leaves investors, stuck using increasingly obsolete methods and tools to cope with new market dynamics and challenges. This sad state of affairs was evident as tends of millions of investors lost nearly half of their life savings in late 2008 and early 2009 by heeding "conventional investing wisdom" or relying on advisers.