Monday, July 12, 2004

Why Stock-Picking Funds are a Bad Idea

Via Arnold Kling comes a telling statistic:

Few have taken the trouble to examine the heavy penalties that managers have extracted from the returns earned by fund investors. During the past decade, for example, while the stock market has returned an average of 11.1% per year, the average equity fund has delivered just 8.6% -- a 2.5 percentage-point shortfall roughly equivalent to the drain of the heavy sales charges, management fees and operating expenses, and portfolio turnover costs it incurred.
See why low-cost index funds are a good idea?