Investment Myths & Fantasies

Another Bad Year For Active Managers

From the Financial Times (11/11/2014): “Fewer fund managers are beating the market this year than at any time in over a decade, piling further misery on a profession that faces increasing investor scepticism.” Among actively-managed U.S. large-cap equity funds, “Only 17.7 per cent are beating the Russell 1000 index of large-cap stocks so far this year. That compares with 40.5 per cent for 2013 as a whole.” Since 2003, “there has only been one year–2007–when a majority of active managers beat the market.” Every year, of course, there’s some convincing new reason why the “irrational”market once again stumped the managers. […]

Mutual Fund Investing–The Video!

The link with this post will take you to a YouTube video that dramatizes the perils of investing in a handful of actively managed mutual funds. For those who prefer words to film, here’s the same story in prose. When you invest in stocks or bonds, you can do so either through passive index funds that simply own (or replicate) all or part of the total stock or bond market, or through “active” managers that attempt to outperform the market return and charge relatively high fees. If you hire the latter, you are incurring “active risk”: the risk that your […]

Glittering Forecasts

A January 3 article by Gregory Meyer in the Financial Times has reminded me that ‘tis the season for the punditocracy to issue their annual forecasts. Meyer’s story noted that this time last year, virtually every market analyst predicted that the price of gold would continue to rise. “Even the most conservative saw only tiny declines.” In fact, gold prices plunged 27% from December 31, 2012 to December 31, 2013.  And if you owned gold through the popular ETF, GLD, your loss for the year was 28%. The interesting irony here is not that the pundits were wrong–extensive research has […]