Being smart with $$ -- 82% of actively-managed stock funds do worse than their benchmark

82% of actively-managed stock funds did WORSE than their index benchmarks over the last 15 years, reports the Wall Street Journal today referencing the SPIVA scorecard.  That means you had a far better chance of maximizing your portfolio by leaving your money in unmanaged index funds than in funds where someone gets paid well to choose which stocks to own and which ones not to own.  How is this possible?  The fees extracted by the fund managers leave them at a big disadvantage vs. index funds that charge miniscule fees by comparison.  The moral? Chasing performance may leave you with underperformance more often than not.

Larry Pike, CFA

www.clientpriority.com

Being Smart with $$ -- Survivorship Bias Makes the Fund Industry Look Better Than It Is

The attack of Survivorship Bias! Did you know that the performance of existing investment funds as a whole is worse than it may seem on the surface?  That’s because the real stinkers are shut down out of existence and cease to drag down the average of the survivors.  When comparing active fund management against passive index investing, the active managers are boosted by the fact that only the successful ones are still around for comparison.  This generally makes active manager performance as a group look better than it is. 
This is one topic highlighted in my newly updated website: WWW.CLIENTPRIORITY.COM
Please visit my site for more interesting research articles.

Larry Pike, CFA

Being Smart with $$ -- Quarter update, but it's the decades that matter

First quarter update: U.S. stocks were up a healthy 5.8%.  But have you avoided international stocks because they have done worse than U.S. stocks lately? If yes, that cost you as international stocks returned 8.5%.  What will they do next? Turn on CNBC and you’ll hear some say the markets are going to roar ahead.  Others will tell you we are set for a fall.  Some will insist international stocks have started a run of outperformance.  Others will disagree.  It all depends which 5 minutes you spend watching.   Maybe best to leave the TV off and stick to a well thought out investment plan.  This quarter was great but it’s decades that matter when building a retirement account. (Vanguard “total” index funds used for returns above.)

Larry Pike, CFA

www.clientpriority.com