The World's Most Honest Money Manager Tells All

I'm not just talking about brokers, mind you, but loads and other fees, and the government, too. If we accumulate wealth, Uncle Sam is in for a cut. Put all the pieces together and [Vanguard founder John] Bogle has it right: It's not easy to outperform.

Third, we're all human. We tend to do exactly precisely the wrong thing at the wrong time. I used to get exercised about it. I used to think people were stupid, now I realize they're just people.

We all fall prey personally to human nature. We finally buy CiscoCSCO at $84 and decide to throw in the towel at $11. We can laugh, but it's true -- professionals and individuals alike.

When you put those three elements together, you realize that your best bet is to make your investments, lock them up and don't look at them for a good long time -- except to rebalance occasionally. Didn't Warren Buffett say his favorite holding period is forever?

2. Yes, and he also said in a 1996 Berkshire Hathaway report that for most investors, indexing is the right way to go. While you readily concede these points, your firm has outperformed fairly consistently. How have you managed to do so?

Yes, we have managed to outperform. If you throw in taxes, we lose some of that outperformance. And frankly, I've been doing this for almost 30 years, but even that isn't enough time to prove that it isn't just luck. We've all flipped the coins a lot of heads in a row.

3. Why, then, should anyone invest with Aronson?

If this conversation were taking place over a few drinks, I might be even more honest with you. (Laughs.)

Individuals should only invest in us and the Quaker Small-Cap Value fund if they're prepared to ride the roller coaster with up and down returns. I'm not even talking about absolute returns. I'm taking about relative returns. It is impossible to find a period that demonstrates that more than the past six years.

The peak on March 2000 was so damaging and punishing to value investors that it should always be remembered when people bet on a style or a manager's skill. So many value investors just gave up and tried to run with the bull market.