Ah, the myth of the expert investor. Time and again, it's been proven that the experts don't pick stocks better than an index fund. If they did, managed funds would do better than index funds.
http://www.cnbc.com/2015/06/26/index-funds-trounce-actively-...
In other words, I personally believe in weak forms of EMH, since I believe having an "edge" is very very hard but not impossible. I base this belief on my 15 years of experience investing in the stock market. Without a doubt, the default assumption for any analysis of the markets should be "no one can outperform index funds" but I think there is evidence that reality deviates slightly from this default assumption.
>that 5% has a disproportionate impact on the marginal price of shares.
"Myth" and "proven" are interesting words to use. Your citation doesn't support the conclusion that experts are proven to perform worse than index funds. What your citation supports is a claim that it is very difficult to beat the market.
I see this zeitgeist expressed on Hacker News very frequently, as though we can't simply look at the numbers and find out if there are experts capable of beating the market consistently.
In point of fact, whether or not a fund performs better than index funds has nothing to do with whether or not it's managed, but rather with how it is managed. You've made a falsifiable claim here, so let's pursue that:
>> If they did, managed funds would do better than index funds.
Pick a timeline, ideally one that seems rigorous enough for consistency. How about 15 years?
The PRPFX and JENSX funds have both beaten the S&P 500's average annual returns over a 15 year timeline. [1]
You might say that 15 years is not long enough to be sure, so let's go with 20 years.
The legendary Renaissance Technologies Medallion fund averaged a whopping 71.8% annual return between 1994 and 2014, which trivializes the S&P 500's ~7.4% during that time. [2]
How about 30 years, you ask? In that case, Baupost Group has enjoyed a 19% average annual return, soundly defeating the S&P 500's ~7.3% average annual return over the same time span. [3]
How many of these can we find?
Bridgewater's PureAlpha had an 18% average annual return between 1991 and 2011 [4].
Farallon Capital had a 13.4% average annual return for 27 years, between 1985 and 2012 [5].
This list goes on. One could look at this and say, "but index funds beat most actively managed funds" but that is not at all the same thing as claiming it is a provable fact that experts cannot beat index funds.
We do not gasp in awe and terror when software developers are capable of actually writing a for loop despite wide reports that most candidates are unable to complete FizzBuzz in an interview. Successful programming is not a "myth." In the same way, we should not act as though it is impossible to beat the market just because it is difficult and requires effort.
---
[1]: http://www.marketwatch.com/story/this-is-how-a-mutual-fund-c...
[2]: http://www.bloomberg.com/news/articles/2015-06-16/how-an-exc...
[3]: http://www.wsj.com/articles/SB100014240527487041677045752584...
[4]: http://nymag.com/news/business/wallstreet/ray-dalio-2011-4/i...
[5]: http://www.forbes.com/sites/kerryadolan/2012/10/23/californi...