Good morning, good afternoon, good evening. Depending on the part of the world you’re in. This is Jonathan Satovsky of Satovsky Asset Management. And on today’s episode of “Seeking Wisdom, Wealth, and Wellness,” I want to talk about statistical significance.
So, I am a very big believer in investing in equities for the long run, and I’m also a believer in the entire market—that like the 1975 letter Warren Buffett had written to Katherine Graham—I agree with him that the probability of most investors outperforming the simple market indexes is close to nil over time, predominantly because of fees, behaviors, and taxes. But the biggest one is behavior.
So when I talk about statistical significance and they say, well, Warren Buffett is an outlier, well, there is statistical significance by academic research and in the execution of the idea of leaning towards certain factors. If you can handle what’s called tracking error that there’s statistical significance for the sustainable and persistent execution of cheap, small, and profitable companies establishing a tremendous amount of value which is basically built on the principles that Warren Buffett and Charlie Munger have been executing for half a century and blending it with Jack Bogle’s idea of indexing of keeping your cost down. You can marry the two and add tremendous value over a long period of time (if people were educated and understood it) on your own path to Wisdom, Wealth, and Wellness.
Have a great day.