Most investors believe that successful investing requires an accurate assessment of the future. As a result, the financial industry employs an army of analysts and researchers forecasting and commenting on business conditions, interest rates, exchange rates, industry trends and government policy, as well as conducting extensive analysis on the prospects for thousands of individual companies. The goal is to identify stocks or bonds with above-average prospects.

A large body of academic evidence suggests that these research costs are largely wasted.  If costly research has failed to achieve satisfactory results, what is the alternative? How should investors go about structuring portfolios? Why would we expect to find that companies with below-average prospects have above-average investment returns? Which broad factors appear to drive investment results in countries around the world? Do alternative investments such as hedge funds, private equity, or commodities deserve a place in a diversified portfolio? What is the role of a financial advisor if there is no expected payoff for efforts to predict market trends or identify superior securities?

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