Saturday, August 27, 2011


Most of the world’s investment managers are highly educated individuals with MBA (Masters of Business Administration) degrees.  Yet, most of these educated, talented, and hard working folks still fail to beat simple passive indexing strategies.  Standard and Poor’s released a study that shows that the vast majority of mutual funds lost to the S&P indices over the past five years:

  1. 61% of large cap managers failed to beat the S&P 500 (large cap index)
  2. 79% of mid cap managers failed to beat the S&P 400 (mid cap index)
  3. 61% of small cap managers failed to beat the S&P 600 (small cap index)

What’s more, the study did not point out that the minority of managers that did beat their respective benchmark indices (cough, LUCKY!) will most likely not do it again over the next five years.  But, numerous studies, some by Vanguard, show this also to be true.  Thus, don’t be fooled into thinking that you can pay an advisor, likely another MBA, who can pick the best mutual funds that will beat their benchmark indices.

I can tell you that this duMBAss invests his serious money only in index funds (and I suggest everyone else do the same).

No comments:

Post a Comment