Should you follow the investing gurus?

Big names don't necessarily mean big returns.

Andrew Hepburn 17 March, 2017 | 5:00PM

Turn on the financial news and you may encounter a bold forecast from a reputed investing guru, like a newsletter writer or a famous hedge fund manager. Or you may read stories, based on regulatory filings, about how a large fund has taken a big position in a stock. The question is, should these proclamations and reports influence your own portfolio decisions?

Before answering this, it's worthwhile to recall a famous scene from The Big Short, based on Michael Lewis's bestseller of the same name. It's March 2008, and legendary fund manager Bruce Miller is facing off against housing bear Mark Baum on a conference panel about the mortgage market. Baum predicts doom while the optimistic Miller reiterates his bullishness on investment bank Bear Stearns, which was heavily exposed to subprime bonds. During the debate, Bear's stock plummets an astounding 38%. Informed of this during the Q and A, Miller suggests he might buy even more.

We all know what happened to Bear Stearns.

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About Author

Andrew Hepburn

Andrew Hepburn  Andrew Hepburn is a freelance financial writer based in Toronto. He writes about investments, market trends and personal finance. He has written for Maclean's, the Globe and Mail, RateHub.ca and Canadian MoneySaver.

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