The author of the famous book A Random Walk Down Wall Street, Dr Burton Malkiel, has recently visited Australia on a promotional tour for investment fund manager Vanguard. Malkiel is a board member of Vanguard's parent entity in the US. Before going any further, to be totally transparent I should make it clear that we recommend the use of some Vanguard funds in building investment portfolios for clients. Unfortunately he did not visit Brisbane on his tour as I would have loved to have listened to his views.
Now that I have gotten that disclosure out of the way...
During his visit he conducted an interview with Alan Kohler which has been published in the Eureka Report - Why it's so hard to "beat the street". In the interview Kohler broaches a range of issues with Malkiel including Warren Buffett's position on index funds, why personal investors should use index funds as the core of their investment portfolios and why investors are very unlikely to "beat the market".
Malkiel re-iterates a great quote that has been made by him in the past - a "chimpanzee with a dart" could do better than active managers, "although not only portfolio managers but the chimpanzees got angry at me for being compared with active portfolio managers."
Not only does Malkiel come out strongly in favour of using index funds, he also talks favourably about the "value" effect that we have identified as one of the three factors of investing.
I really encourage you to take a look at the article - Why it's so hard to "beat the street"