A random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing

parted company and she left the mutual-fund management
business.
Perhaps the most colorful investment gurus of the mid-
1990s were the homespun, grandmotherly (median age
seventy) Beardstown Ladies. Called by publicists “the
greatest investment minds of our generation,” these celebrity
grannies cooked up profits and hype, selling more than a
million books and appearing frequently on national television
shows and in weekly magazines. They mixed explanations of
their investment success (“heartland” virtues of hard work
and churchgoing) with yummy cooking recipes (such as
stock-market muffins—guaranteed to rise). In their best-
selling 1995 book, 
The Beardstown Ladies Common-Sense
Investment Guide
, they claimed that their investment returns
were 23.9 percent per year over the preceding decade, far

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eclipsing the 14.9 annual percent return of the S&P 500
Index. They suggested that ordinary folks could do just as
well following their advice. What a great story: Little old
midwestern ladies using common sense could beat the pants
off the overpaid investment pros of Wall Street and could
even put index funds to shame.
Unfortunately, the ladies were discovered to be cooking
the books as well. Apparently, members of the Beardstown
group were counting their investment club dues as part of
their stock-market profits. The accounting firm Price
Waterhouse was called in, and it calculated the ladies’ true
investment return over the decade to be 9.1 percent per year
—almost 6 points below the overall market. So much for
getting rich by worshiping investment idols.
The moral to the story is obvious. With large numbers of
technicians predicting the market, there will always be some
who have called the last turn or even the last few turns, but
none will be consistently accurate. To paraphrase the biblical
warning, “He who looks back at the predictions of market
gurus dies of remorse.”