“Why settle for average?”
That’s the kind of comment you’re likely to hear from someone selling an expensive managed mutual fund or, today, an expensive exchange traded fund.
That kind of talk is cheap. But the results, if you follow that lead, will be expensive for you. If you base your investing on evidence, on actual results rather than content-free assertions, you’ll know that the majority of managed funds do worse than the index they are measured against.
And we’re not talking about a slender majority here. We’re talking about a whopping majority. A landslide, in election talk.
More important, this isn’t some new affliction. It isn’t a struggle managers will eventually overcome. It’s a constant. It’s a fact of life. It’s a result that shows up time after time after time. You’ll find abundant proof throughout my website, but here are three columns that make reference to a continuing study by Standard and Poor’s that examines how managed funds in a multitude of categories fare against the index they are supposed to beat.
What makes the SPIVA reports (short for Standard and Poor’s Index versus Active) so interesting is that they measure performance against ALL the funds that started a particular period, not just the funds that survived the period. Since a significant percentage of funds don’t survive, the SPIVA report is a true measure of how managed funds did against their appointed index.
All three columns can be found on the growing archive of columns on my other website, www.scottburns.com
Four Milestones for successful investing, 12/09/2006
https://scottburns.com/four-milestones-for-successful-investing/
There is nothing quite like the Assurance of Failure, 05/20/2012
https://scottburns.com/there-is-nothing-quite-like-the-assurance-of-failure/
The Lessons of Couch Potato Investing, 11/25/2016
https://scottburns.com/the-lessons-of-couch-potato-investing/
This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.
Photo: Scott Burns, a calm late afternoon in Lincoln, ME
(c) Scott Burns, 2018