Biden’s Potential SEC Head Wrote Book Calling Stock Picking a ‘Hoax’

Investor watching the change of stock market on laptop.
SamuelBrownNG / Getty Images/iStockphoto

President Joe Biden has nominated Gary Gensler to run the Securities and Exchange Commission. Gensler worked at Goldman Sachs before working for the federal government in the Treasury Department and Commodity Futures Trading Commission. More recently, he has taught economics and management at MIT. He has a solid resume, according to reporting by Quartz.

See: These Are Goldman Sachs’ Biggest Predictions for 2021
Find: Did GameStop Happen Because of COVID-19? How 2020 Sparked a Retail Investing Craze

Gensler shared his perspective on stock picking in a book that he wrote with Gregory Baer called “The Great Mutual Fund Trap,” released in 2002. While it may seem outlandish, his advice to avoid stock picking and active management in favor of indexing and other passive strategies is conventional wisdom on Wall Street. Reams of academic research shows that after adjusting for expenses and risk, most money managers and individual investors underperform when trying to beat the market.

Building Wealth

See: One Personal Finance Expert Shares His Top 3 Investing Tips
Find: Why Now Is the Time for Gen Z to Start Investing

The few money managers who do manage to beat the market are able to charge fees that are high enough to eliminate their advantage. It’s hard for the average person to believe that all these people with fancy degrees and IT systems worthy of NASA haven’t uncovered a secret that they refuse to share, and yet, it’s true.

Gensler’s position also signals how he would deal with Robinhood and other trading apps. He has long expressed skepticism with day trading and app trading, and so he is likely to have an aggressive approach to regulating them. This may be a disappointment to people who have jumped into the meme stock game, but it may also save them in the long run.

More from GOBankingRates

About the Author

Ann Logue is a writer specializing in business and finance. Her most recent book is The Complete Idiot’s Guide: Options Trading (Alpha 2016). She lives in Chicago.

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.