In this guest commentary column, Roger Ibbotson, founder, chairman and president of Ibbotson Associates, discusses issues of interest to equity investors, including long run performance, growth investing and market timing. These critical investment issues were among a number of topics discussed in an enlightening and entertaining manner by Dr. Roger G. lbbotson, one of the nation's leading finance and investment authorities, at an educational event hosted by the Private Client Group in 1997. Ibbotson is chairman and president of Ibbotson Associates and a professor in the Practice of Finance at the Yale School of Management. He has authored several books on investing and serves on the board of a number of investment organizations. However, while they often exhibit very high returns in the short-run, IPOs typically underperform the market over the long haul.
More firms tend to go public at the peak of industry fads.
Ibbotson said that large company growth stocks generally represent the best opportunity for investors, assuming one doesn't pay too much for that growth. The key to successfully investing in growth stocks is being a reasonably accurate forecaster of growth, and getting that growth at a reasonable price. Finally, Ibbotson discounted the efficacy or value of timing the market. All studies suggest that investors trying to time the market will lose out on opporiunities to make money. Even the leading brokerage firms have shown through the performance of their quarterly asset allocation recommendations that there is little evidence that Wall Street can time the market.