Is the Smart Money Dumb?

"Professional investors are prone to the same mistakes as mom-and-pop types," writes Jason Zweig in the WSJ.

For example, they hold stocks too long, past their peak prices. (But that merely shows they aren't clairvoyant.)

The smart money's math skills seem shaky, research suggests. And even the pros may accidentally confuse one stock with another of similar name or stock symbol.

If the smart money suffers from the dumbs, can mom and pop investors do better? Yes, according to Warren Buffet in one of his Berkshire-Hathaway shareholder letters:

By periodically investing in an index fund, the know-nothing investor can actually out-perform investment professionals. Paradoxically, when `dumb' money acknowledges its limitations, it ceases to be dumb.

The smart money doesn't make better decisions, Zweig asserts."They just get paid to make them."