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. […]

Where’s the Value Added?

In my blog, “Costs Matter!” I show how dramatically higher fees will compound over time to reduce investors’ cumulative wealth. But costs are only one side of the investment coin, the other side of which is returns. Frankly, I don’t care if Fund A costs me more than Fund B, if my net returns from Fund A are higher than those from Fund B. So what we need to understand is whether the financial services industry succeeds in delivering  better-than-market returns net of the fees and expenses investors incur. That’s the industry’s value proposition: pay us to manage your money […]

Costs Matter!

When it comes to investing, what you don’t know can cost you plenty. And people who’ll drive half a mile to save 4 cents a gallon on gas, or clip coupons to get 20 cents off a can of soup often have no clear idea how much they’re paying their investment managers (e.g., mutual funds) or financial adviser/consultant at UBS or Smith Barney. The answer is: plenty. Consider this real-life example: In 1971, John and Jane met at work and married at age 25. Like the rest of us, they didn’t have any money to spare in the 1970s, but […]