Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Market performance persistence is hard to find. The strong pull of regression-to-the-mean wins the battle in seemingly all encounters.
Mutual funds that outperform in one study period fall below the averages in extended timeframes. Fund managers are highly skilled, but that high skill level tends to cancel each other out. Luck becomes a major differentiating factor. Why do we invest in actively managed funds given that extensive negative database?
Perhaps overconfidence in our selection process is one answer. But the accumulated data clearly demonstrates that, on average, actively managed mutual funds underperform market returns, and additionally, individual investors underperform mutual funds. The cumulative underperformance is dramatically bad for end wealth.
I suppose we are all above average on selecting winning strategies and hiring fund managers. Good luck in that regard. You'll need a boatload of luck!
A simple solution exists. Cut costs and go passive.
Comments
Market performance persistence is hard to find. The strong pull of regression-to-the-mean wins the battle in seemingly all encounters.
Mutual funds that outperform in one study period fall below the averages in extended timeframes. Fund managers are highly skilled, but that high skill level tends to cancel each other out. Luck becomes a major differentiating factor. Why do we invest in actively managed funds given that extensive negative database?
Perhaps overconfidence in our selection process is one answer. But the accumulated data clearly demonstrates that, on average, actively managed mutual funds underperform market returns, and additionally, individual investors underperform mutual funds. The cumulative underperformance is dramatically bad for end wealth.
I suppose we are all above average on selecting winning strategies and hiring fund managers. Good luck in that regard. You'll need a boatload of luck!
A simple solution exists. Cut costs and go passive.
Best Wishes