According to an article in the July, 2003 Economist (The Law of Averages), most mutual fund investors use "recent track record" as a basis for selecting which mutual funds to buy. That approach produces unbelievably poor results.

For example, during 1984-2002 the S&P 500 averaged a little over 12% per year in average returns. During the same time frame the average mutual fund produced just under 10% average annual returns, but the average mutual fund investor achieved less than a 3% annual returns.

It's easy to understand how investors could achieve such lousy returns when you analyze the results of a study done by Lipper. That study followed the results of the top ten performing mutual funds from 1996-1999. In the subsequent period from 1999-2002, all ten previous top ten performers ranked in the bottom ten percent of the same universe of funds three years later.

So what's happening? Investors keep jumping to the best performing funds just before their luck runs out. Do you really think that the top performing managers from 1996-99 became less qualified or lazy or worse managers in the subsequent period. No - they were just less lucky.

The moral of the story - no one can accurately and consistently predict stock movement and so it doesn't make sense to pay fees to someone who's just guessing like everyone else. Truly a story Wall Street doesn't want you to find out.

 

Call or email me today to get your Free copy of  "Living Debt Free And Truly Wealthy" based on the 'Found Money Management™' Concept.
 

Yours in Success,

Nathalie Vaiser, FMM