I am in Spain, walking the Camino, contemplating life, and this topic still catches my eye and makes my blood boil…see, now that I am out of the mutual fund world myself, I can speak up and say the things I always wanted. Not sure if anyone will listen, but….here is one example.
S&P came out with their investment report card (SPIVA) that compares actively managed mutual funds to passively managed funds. A link to the full report can be found below. It doesn’t look good for active, same as it always does. I’d also add the success %’s get even worse when you compare the fund manager to their more appropriate benchmarks (this study compares all to S&P 500). You are throwing away money and likely taking years off your life from the added stress.
I get that people still invest this way (using active funds). It’s hard for me to grasp, but I understand. History is tough to let go of and change is tough for some to grasp.
What fascinates me is how thousands of brilliant fund managers, with amazing analytical skills, amazing resumes, and very sophisticated educations , can show up everyday and do this. …Is it ego or how much they are paid? Even the ones who win for a year, or even 10 years, are still intelligent to know that statistically they have many more years to go before they can pat themselves on the back. They know the truth.
There’s not an MBA course in the country that doesn’t spell this all out and teach differently. I am pretty sure the CFA says the same thing. There’s even evidence in case law. But they don’t change because 120 bps of revenue is much better than 20bps.
Could you wake up everyday to go play a fictitious game where you lose others money? I am really surprised by how many can…
Don’t agree? Fire away…you’ll lose though.