But powerful disincentives also exist and harm markets. A punitive policy mix repels capital and warrants a focus on its protection.
Prices are objective and contain implicit forecasts of financial returns and risks.
Further, markets are both global and interconnected. Reliable forecasts of the returns and risks likely to be generated by broad asset classes necessarily benefit performance-oriented investors. IFI does not endorse portfolio diversification for its own sake, or as a default position reflecting agnosticism about the future. They advise a passive strategy of buying, holding and re-balancing. Those who believe, in contrast, that managers can actively out-perform, tend to do so by claiming markets are irrational and perpetually mispriced.