Financial Industry Still Defying Gravity

The Economist has a great article last week about how fund managers are measured.  It points out that both in private equity and most mutual funds, fund managers often take home millions or billions in pay for performance that is mediocre or nonexistent.  I learned this back in college as an Economics student that stocks are largely a random walk and that index funds are the most efficient way to invest.

So far, nobody has been able to refute that basic idea around investment strategy, but neither does it seem to have gripped most investors. The academic research shows over and over again that investment advisors are a waste of money.  And the press shows over and over again that those same people keep getting paid more and more money.  (Economist)

How long can the whole industry defy gravity?  The more I see things like this, the more I am concerned that Wall Street has gotten too big for America's benefit and that it is no longer functioning as an efficient distributor of capital.  And really, it's a shame I learned all this useless stuff in college.  If I had majored in English and gone to work at Morgan Stanley, I'd be rich by now.

Wall Street - Still Larger Than Life (Picture by HMerinomx)