Investors trying to outperform a market shaped by professional competition may improve their chances by avoiding preventable errors, Charles D. Ellis argued, adapting a tennis comparison to explain why standout trades are hard to repeat.
Ellis first set out the argument in “The Loser’s Game,” a 1975 article in Financial Analysts Journal. In an AQR interview, he said amateur tennis players can improve their chances by keeping the ball in play and letting an opponent make a mistake instead of attempting a difficult winner. “Let the other guy hit it out or into the net,” Ellis said.
He used the comparison to describe a contest that, in his view, favors professional investors. Their training and access to information and resources make it more difficult for individuals to outperform, he said.
Ellis estimated that the 50 largest transactors accounted for about half of institutional trading. He put institutional investors’ share of all trading at roughly 20% when his article appeared and near 97% by the time of the AQR interview. Those were his approximate estimates from that interview, not current market measures.
Ellis did not rule out active managers beating the market. He said some do, but sustained success is uncommon, and he viewed identifying managers likely to outperform a decade later as especially difficult. His argument centers on the challenge of selecting winners in advance, rather than a claim that no active manager can succeed.
The CFA Institute said Ellis returned to the theme in a 1995 article, about two decades after the original appeared. In a 2025 WealthTrack interview, Ellis said an investment plan should reflect a person’s characteristics, aspirations and long-term horizon. He also cited index funds and exchange-traded funds as options that may reduce the drag from operating expenses and taxes, within a plan suited to the individual.
