Matt Schifrin: Money Managers' Skills Are Unproven

In his new book, “The Warren Buffetts Next Door,” Matthew Schifrin reveals the stories of 10 Average Joes who worked their way into the world of financial investments. Schifrin's biggest revelation, however, may have come during his recent interview with Benzinga. Rather than allow someone else to control your money, Schifrin recommends that we all take the time to learn about the investment process. “I think the vast majority of professional money managers are hired without any real proof that they're good at investing,” he said. “Most of ‘em have great degrees, they went to great colleges. They come out of school and they get a job with Fidelity or one of these other big mutual fund managers, and next thing you know they're managing huge portfolios.” Schifrin, who serves as the Vice President and Investment Editor at Forbes, said that there is a lot of emphasis on diversification. “So many times investors will diversify away their returns,” he continued. “Even Warren Buffett has criticized [diversifying] too much. I think his quote was, ‘Diversification is protection against ignorance.' It makes little sense for those who know what they are doing.” More often than not, Schifrin says that when the people in his book become convinced that a stock is deeply undervalued, they will invest a lot of capital in that stock or a group of stocks. “They don't just run with broadly diversified portfolios,” he added. “Oftentimes they will have a diversified portion of their portfolio, but also, when they find an investment they like they really commit to it.” “Most of the professionals will tell you that you should expect 6% average annual return from stocks for the foreseeable future,” Schifrin concludes. “For a lot of us, that's just not going to cut it.” To hear more from the Forbes VP and Investment Editor, don't miss Benzinga's full interview with Matthew Schifrin.