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, Thu, 12 Jan 2012 21:39:33
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I read + enjoyed your article below... To a large extent I agree (which is why I pointed out index investing in my post).
Though a somewhat imperfect analogy, I liken mutual fund investing to "dealer servicing" a car: a higher cost solution that removes "much" of the knowledge required to successfully diy... I say "much" because in both cases, one has a better chance of success in the "hands off" approach if one does have some knowledge...
One rationale for investing in a mutual fund is if it offers a wide basket of securities that suits one's interests, that can be handy vs trying to collect + manage that same wide basket personally. Ie an easy way to diversify (diversification, almost by definition, steers one closer to market average returns)... But, if there are loads and/or significant office costs, those can substantially wipe out the returns.
The other rationale is that a fund manager batting the market average is better than what some "market chasing" individual investors achieve... ie those particular investors would be better off with a fund because the fund managers *should* have a somewhat higher level of knowledge + discipline... though, that is not always the case... and that doesn't make a fund better than an index...
wrt the article... I actually was a little surprised that the fund managers were so close to zero correlation. Makes me wonder a little how the statistics were done. I would have expected low, but not quite zero. I would have thought, like any investors, that some would bat a little above 50 and some below 50... but I suppose that was the point of the article, to refute that hypothesis. I wonder how it compares between firms + funds + if this is averaged over multiple funds per manager or per fund... fund rules must play a role in the results... I've in the past noticed some funds that regularly do better than others (or more so, that some just plain stink), but that this is not tied to a specific organization - within an organization, the funds tend to be randomly good or bad... or at least in the limited looking I've done... performance is partly correlated to asset class (ie market sectors), but there are seemingly good and bad (year after year) within a class also...
In my observation, all of the above can also be said of individual investment advisors, except perhaps with an "occasional" good dose of individual investors lack of discipline (and in extreme cases overt deception) thrown in as well... buyer beware!
James...
posted by 216.59.227...
, Thu, 12 Jan 2012 11:09:33, Sat, 14 Jan 2012 15:13:12, Thu, 12 Jan 2012 21:39:33
, Thu, 12 Jan 2012 14:59:25, Thu, 12 Jan 2012 12:10:58, Thu, 12 Jan 2012 14:01:06
, Fri, 13 Jan 2012 12:35:06
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