Persistence of outperformance - another Rick Ferri note

Discussion in 'Financial Planning' started by David S Meyers CFP, Dec 12, 2011.

  1. Thought this was a great quick read:

    <http://www.rickferri.com/blog/investments/luck-runs-out-for-former-star-funds/>

    Former top mutual funds are falling behind their peer groups in record
    numbers. Overall, only 42 percent of past winning US equity funds for
    the five years ending in September 2006 stayed in the top half over
    the next five-year period ending in September 2011. Another 44 percent
    fell to the bottom half of the rankings and the remaining 14 percent
    went out of business. This is according to the most recent Persistence
    Scorecard on mutual fund performance published by Standard and Poor's.

    Etc. Of course, Ferri's the author of books about ETFs and
    passive investing, but he's also pretty careful with numbers
    and research. Much of this blog entry of his cites S&P's
    scorecard of indices vs. active funds which may be found
    here: http://www.standardandpoors.com/indices/spiva/en/us

    FWIW, I think one of the reasons to consider a *small* slice
    of active management is for uncorrelated returns. And this is
    not something he addresses, nor is it addressed by the research
    he's citing. The vast majority, though, of actively managed
    funds, are not there for this reason - they are there because
    someone thinks he's going to beat an index, and do so by enough
    to overcome his asset management fees. And very rarely is
    that actually accomplished - and as Rick says, just because
    someone's done that recently, it doesn't mean they are going
    to do so again.

    --David


    --
    David S. Meyers, CFP(R)
    http://www.MeyersMoney.com
    disclaimer: for educational purposes only. This is not financial advice.
     
    David S Meyers CFP, Dec 12, 2011
    #1
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