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Investors tend to discover 'hot' mutual fund managers just after a successful run and just before the inescapable force of mean reversion is about to kick in.

An active investor is someone who actually lives off their investments as opposed to wages from a job.

Often, investors will discover a manager after he's had a terrific run, usually when he lands on a magazine cover somewhere. Invariably, funds swell up with new investor money just before they revert to their long-term averages.

I think a very good system in a world with a lot of passive investors is one in which there are at least a few entrepreneurial investors, prepared to say what they think, prepared to propose a change in management, change in strategy, change in cost structure, capital structure.

A well-managed business will have a high return on invested capital. But that's a consequence. It's not a way to manage a business.

It's no secret that big institutional investors have a lot of advantages on Wall Street. They get the first chance to buy hot initial public offerings. They get to meet in person with companies' managements.

But successful investors tend to be not too self-destructive. They tend to be patient, they tend not to follow the crowd, and they tend not to be too guilty about winning.

The chief problem with the individual investor: He or she typically buys when the market is high and thinks it's going to go up, and sells when the market is low and thinks it's going to go down.

An investor doesn't have a prayer of picking a manager that can deliver true alpha.

Index investing outperforms active management year after year.