Question:

You are an active fund manager. You were recently promoted to the role of CIO. You are trying to revise the core investment philosophy of your firm. While reading some of the literature that you regularly send to your clients you find the following two statements. Provide detailed comments on each of the investment beliefs given below. State whether you support the belief or NOT, providing substantiation with academic citations and professional examples.

Investment Belief 1: Consistent excellent performance can only be achieved through superior knowledge of companies and their securities, not through attempts to forecast macroeconomic factors such as the GDP growth rate, interest rates, or market returns.

Investment Belief 2: Since the predictive ability to correctly time markets is so difficult, portfolios should be fully invested whenever attractively timed assets can be bought.