Why money manager fail to deliver positive results

[l2ridehd]

Here is a link to an article and study conducted on fund managers that shows only .6% or statistically ZERO beat the index fund market over a 30 year window from 1976 to 2006. And if they included 2006 to 2013 (2008 crash) the results are worse.

Almost no one can beat the market - Howard Gold's No-Nonsense Investing - MarketWatch (http://www.marketwatch.com/story/almost-no-one-can-beat-the-market-2013-10-25?dist=beforebell)

And the quote from the study for those who don't want to read the whole article.

"The study documents that in painful detail. Barras, Scaillet and Wermers tracked 2,076 actively managed U.S. domestic equity mutual funds between 1976 and 2006. They found that after fees, three-quarters of the funds exhibited zero “alpha,” a fund’s excess return over a benchmark index. And 24% of the funds were run by unskilled managers (who had negative alpha, or value subtraction).

And — are you sitting down? Only 0.6% — you read that right, 0.6% — showed any true skill at beating the market consistently, “statistically indistinguishable from zero,” the three researchers concluded."

[rubicon]

Eugene Fama economist was awarded a Nobel in economics based on the efficient market theory. Essentially in the long run stocks are priced efficiently but not in the short run. However no one knows when the stock market is efficiently priced. There has never been proven that active fund managers ever beat the market. They are average before costs.

I prefer the cost matters hypothesis because it ensures low cost and appreciable returns.

[gustavo]

Eugene Fama economist was awarded a Nobel in economics based on the efficient market theory. Essentially in the long run stocks are priced efficiently but not in the short run. However no one knows when the stock market is efficiently priced. There has never been proven that active fund managers ever beat the market. They are average before costs.

I prefer the cost matters hypothesis because it ensures low cost and appreciable returns.

Anyone beating the market averages are not advertising it.

[pauld315]

Right but in many cases, they are building a portfolio that is appropriate for the client's risk tolerance, age and goals, not only to try to beat the market indexes. I am not an advisor but I do use one for a portion of my IRA's. I do this to remove the emotion from those investments. We sit down together every 3 months to discuss where we are vs the goals we set based on the retirement plan he and I put in place at the beginning of our business relationship and what adjustments he might suggest. I am the one who makes the final decision to go with his suggestion or not based on his explanation to me. There is no pressure to adopt any of his suggestions. If during the 3 months, I see something that catches my eye, I just make a phone call and setup an appointment to discuss it with him. He doesn't get paid selling me products, he gets a flat percentage fee every year based on how much I have him manage. It works good for me but I know it is not for everybody. I do also manage some of my investments myself and do OK. He also advised me on what option to take when taking my pension, what life insurance I need, income tax reduction, SS timing, etc etc. All of that isincluded in his one fee I pay him. Who knows, maybe someday I will just go back to doing it all myself but in the meantime he is teaching me a lot and provides me some peace of mind.

[dewilson58]

Diversified and doing it myself.

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