30/11: Are You A Savvy Investor?
Did you know that actively managed mutual funds are a negative sum game?
A study conducted by Arnott, Berkin and Ye reports that in the twenty years to 1998 the average mutual fund underperformed the market by 2.1% (Journal of Portfolio Management 26, no. 4). Only 22% of the funds outperformed the market. The market is defined as Vanguard's S&P 500 Index Fund.
For taxable investors it is even worse. High turnover produces higher taxes and lower returns.
The average fee of a mutual fund is more than 1% greater (each year) than a passive index fund.
Be a savvy investor: keep your fees and turnover low!
O. Sam Folin, CFA
November 30, 2005
A study conducted by Arnott, Berkin and Ye reports that in the twenty years to 1998 the average mutual fund underperformed the market by 2.1% (Journal of Portfolio Management 26, no. 4). Only 22% of the funds outperformed the market. The market is defined as Vanguard's S&P 500 Index Fund.
For taxable investors it is even worse. High turnover produces higher taxes and lower returns.
The average fee of a mutual fund is more than 1% greater (each year) than a passive index fund.
Be a savvy investor: keep your fees and turnover low!
O. Sam Folin, CFA
November 30, 2005
