A lot of investors, and people who post on this board think that there are individuals who are particularly adept at picking stocks and/or analysis methods which enable stocks to be picked. Those people are often generously rewarded for their performance.
My gut feel is that it's simply a law of averages. Fund managers and pundits may be able to outperform the market for significant periods of time but eventually their performance reverts to (or even sinks below) the mean.
This is the latest example. Neil Woodford had many years in which his fund outperformed the market significantly but it has now been wound up as under-performance led to money being withdrawn from the fund which in turn led to liquidity problems.
https://www.bbc.co.uk/news/business-50052945
Rather than chasing prominent (and expensive ;)) fund managers, I'd advocate choosing funds where the management of the fund is largely or fully automated so as to closely follow whatever index the fund closest resembles which in turn minimises fees - and hence maximises returns.
Warren Buffet seems to be an exception, but I'd claim that there are two big differences between him and a traditional fund manager:
tl;dr version
IMO "Star" fund managers aren't worth their generous rewards.
My gut feel is that it's simply a law of averages. Fund managers and pundits may be able to outperform the market for significant periods of time but eventually their performance reverts to (or even sinks below) the mean.
This is the latest example. Neil Woodford had many years in which his fund outperformed the market significantly but it has now been wound up as under-performance led to money being withdrawn from the fund which in turn led to liquidity problems.
https://www.bbc.co.uk/news/business-50052945
Rather than chasing prominent (and expensive ;)) fund managers, I'd advocate choosing funds where the management of the fund is largely or fully automated so as to closely follow whatever index the fund closest resembles which in turn minimises fees - and hence maximises returns.
Warren Buffet seems to be an exception, but I'd claim that there are two big differences between him and a traditional fund manager:
- He invests long-term in companies that he understands based on their fundamentals rather than engaging in stock speculation
- He's got to the stage now, and his reputation is such, that his involvement in a company is enough to give the stock a boost and increase investor confidence.
tl;dr version
IMO "Star" fund managers aren't worth their generous rewards.
via International Skeptics Forum https://ift.tt/2ITtzk5
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