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Standard Practice |
relies on accounting-based tools like short-term earnings and price-earnings multiples, which don’t reliably capture expectations |
annual operating and management investment expenses average about 2.5% a year, meaning investors earn only 75% of an annual long-term return of 10% (excluding taxes) |
since fund shareholders generally compare their quarterly returns to a benchmark like the S&P 500, fund managers obsess over short-term relative re-turns rather than focusing on identifying mispriced stocks |
most professional money managers pigeonhole their investing style as either “growth” or “value”—thus limiting their universe of acceptable stocks |
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Expectations Investing Approach |
pinpoints market expectations, then taps appropriate competitive strategy frameworks to help investors anticipate revisions in expectations |
establishes demanding standards for buying and selling stocks, resulting in lower stock portfolio turnover, reduced transaction costs, and lower taxes |
improves the probability of beating the benchmark over longer periods, provided that the fund manager can buck the system and embrace more effective analytical tools |
doesn’t distinguish between growth and value, but instead pursues maximum long-term returns within a specified investment policy; helps identify both undervalued stocks to buy or hold as well as overvalued stocks to avoid or sell in the investor’s target universe |
