> It's been my experience that you can't tell who's smarter than who by what they do for a living. On the whole, no group is actually smarter than any other group.
I assumed they meant professional investors are smarter about evaluating potential investments. Not generally smarter, just smarter about what they put their money into.
OP here. I guess rather than "smarter" I meant to convey: less gullible, less vulnerable to being influenced by silly signals like someone's mannerisms and confidence, less reliant on unexplainable gut feels.
I guess when I think of professional investors picking some of these dogs, my mind imagines that scene in Moneyball[1] where the old timers are trying to pick baseball players by who "looks good," "has a good jaw," "how the ball sounds when it pops off his bat, and "what the player's girlfriend looks like."
I don't know that that's proven. I think it has been shown that index mutual funds generally do as well as actively managed funds. One explanation is that the fund managers don't know better than anyone else. Another explanation is that the fund managers do know better, but their fees are so high that it cancels out the benefit of their expertise. That is, their expertise is real but overpriced.
On a practical level, there's also the matter that, even if some fund managers do beat the market, some other fund managers don't, and it's hard to tell which is which. By going with an actively managed mutual fund, you take on "how do I know my fund manager is one of the good ones?" risk, which you don't have with index funds.
I assumed they meant professional investors are smarter about evaluating potential investments. Not generally smarter, just smarter about what they put their money into.