investing tidbits

I've been reading a lot about investing lately, as I need to make some financial decisions in the near future. I started with The Intelligent Investor, which was very interesting. I then sought out a discussion of index vs. actively-managed mutual funds on the web, and at first couldn't find much useful, impartial information. Then, I hit upon a great resource: Google Scholar. I found a bunch of interesting papers, both on actively-managed funds and on market anomalies, i.e., phenomena that, at least on the surface, seem to contradict the efficient market hypothesis. Here are some of the more interesting things I came across (you may need various subscriptions to actually read the papers):

• Another Puzzle: The Growth in Actively Managed Mutual Funds shows that many investors consistently choose mutual funds that beat the market, later termed the "smart money" effect.
• Profitability of Momentum Strategies: An Evaluation of Alternative Explanations is a recent paper on an anomaly termed "stock return momentum": briefly, a portfolio that buys recently-rising stocks while shorting recently-falling ones is consistently profitable (ignoring transaction costs, I think).
• Does Stock Return Momentum Explain the "Smart Money" Effect? answers the question posed in its title in the affirmative.

I also found this page, which documents various stock market anomalies.

So, what did I conclude? I'm now fairly convinced that a smart person that devotes a lot of time to research can beat the market, in the long term. I'm also pretty convinced that I don't want to spend that kind of time on investing, and even if I did, I may be too risk-averse to be successful. So, for the most part, I'm sticking to index funds.

Vaguely related: this Business Week article on adjustable-rate mortgages is worth a read. Looks like a lot of people made bad decisions with these things.