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" ...why do mutual fund investors continue to buy broker-sold actively managed funds with higher costs and lower performance than direct-sold no-load funds? "
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Hi bee, Time for my head to be at the pillow; but, I will presume your listed quote is from the working paper, of which, I read the first 10 pages. As to the quote, and what has been discussed here before; the majority of individual investors who have a preference to save (bravo for them) via IRA or related tax sheltered employer accts are not comfortable with the world of investing. Over 30 years, very few I have personally know have had a direct desire to learn about investing............the, "it's too complicated, etc." Most of these folks were more than capable of learning about investing, but did not have the passion. In 1984, I formed an investment club among 14 co-workers; in an attempt to help them become familiar with and motivated with investing and profiting from their net income monies that they worked their butts off for each and every day. After 6 months, I was asked to run the club without monthly meetings for learning. Okay, and that was the path for 3 years. Every month everyone received a report of financial status and why the monies were invested in particular areas. All of these folks were highly skilled in areas not involved with investing. The most common thought I discovered from them was that the whole money area was just too complex. Many of the work tasks they performed were very complex, when viewed by others not familiar with their work. I always tried to use this angle to move them along; that they were more that able to learn investing, but not in 2 or 3 months. It would require time and study, not unlike for their "work". A few still invest today, but have advisors manage their monies; for too high of a fee. Several of them have noted looking back more than 20 years to the beginning of the club; and what they would have learned by now, with just a few hours a week of their time.
The short answer - All mutual fund sales people are told before they begin their sales career that mutual funds are not bought, they're sold. After all, it's not an investment industry, it's a MARKETING industry.
Comments
Time for my head to be at the pillow; but, I will presume your listed quote is from the working paper, of which, I read the first 10 pages.
As to the quote, and what has been discussed here before; the majority of individual investors who have a preference to save (bravo for them) via IRA or related tax sheltered employer accts are not comfortable with the world of investing.
Over 30 years, very few I have personally know have had a direct desire to learn about investing............the, "it's too complicated, etc." Most of these folks were more than capable of learning about investing, but did not have the passion.
In 1984, I formed an investment club among 14 co-workers; in an attempt to help them become familiar with and motivated with investing and profiting from their net income monies that they worked their butts off for each and every day. After 6 months, I was asked to run the club without monthly meetings for learning. Okay, and that was the path for 3 years. Every month everyone received a report of financial status and why the monies were invested in particular areas.
All of these folks were highly skilled in areas not involved with investing. The most common thought I discovered from them was that the whole money area was just too complex. Many of the work tasks they performed were very complex, when viewed by others not familiar with their work. I always tried to use this angle to move them along; that they were more that able to learn investing, but not in 2 or 3 months. It would require time and study, not unlike for their "work".
A few still invest today, but have advisors manage their monies; for too high of a fee.
Several of them have noted looking back more than 20 years to the beginning of the club; and what they would have learned by now, with just a few hours a week of their time.
Away I must be...........
Catch
After all, it's not an investment industry, it's a MARKETING industry.