“Any investor who's read the fine print
of his or her mutual fund prospectus is familiar with the phrase "past
performance is no guarantee of future results," or something to that
effect. Of course, very few investors ever actually read the fine print, but a
recent report from the ratings agency Standard & Poor's makes a strong case
they ought to.”
“The "Persistence
Scorecard" is published twice a year by S&P Dow Jones Indices. It
tracks the consistency of the top performing, actively managed U.S. mutual
funds. Index and sector funds are not included in the sample.” Several findings
in particular stand out from the most recent edition of the scorecard, released
last month. The details should be enough to convince even the most loyal and
diehard investors that it's time to give up actively managed mutual funds and
make the switch to passive, market-matching index funds:
- Less than four percent of the 687 funds studied from March 2012 through March 2014 managed to stay in the top quartile of performers. Only 18.66 percent of 1,372 funds studied for the same time period stayed in the top half.
- Out of 715 funds studied from March 2010 through March 2014, only 0.28 percent stayed in the top quartile of performers. Only 4.47 percent out of 1,431 funds studied for the same time period stayed in the top half.
“In other words, even when actively
managed funds perform extremely well, they’re not likely to sustain that
performance for an extended period of time.” Directly quoted from John
Grgurich, The Fiscal Times. Read more at: http://www.thefiscaltimes.com/Articles/2014/08/19/Why-Your-Hot-Mutual-Fund-Probably-Won-t-Stay-Way
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