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Wall Street Is A Rentier Rip-Off: Index Funds Beat 99.6% Of Managers Over Ten Years

Tyler Durden's picture




 

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

The entire financial management industry is a profit-skimming rentier arrangement.

It may seem uncharitable to note that only .4%--that's 4/10th of 1%--of mutual fund managers outperform a plain-vanilla S&P 500 index fund over 10 years, but that is being generous: by other measures, it's an infinitesimal 1/10th of 1%.
 
 

According to the folks at the Motley Fool, only ten of the ten thousand actively managed mutual funds available managed to beat the S&P 500 consistently over the course of the past ten years.Consider the following: a quick glance at Yahoo Finance reveals the average expense ratio for growth and income style mutual funds is 1.29%. As a result, approximately $1,883 of every $10,000 invested over the course of ten years will go to the fund company in the form of expenses. Compare that to the Vanguard 500 fund, designed to mirror the S&P 500 index, which boasts an annual expense ratio of only 0.12%, resulting in ten-year compounded expense of $154 for every $10,000 invested.

Frequent contributor B.C. recently screened 24,711 funds on Yahoo Finance's fund screener and 17,785 funds on the Wall Street Journal's online screening tool. The results were sobering, to say the least: using a basic set of criteria, the first screen turned up a mere 5 managers who beat the S&P 500 index over five years. Using a slightly different set of criteria, the second screen found 71 funds out of 17,785 outperformed the index over ten years.
That's .4% of managed funds, i.e. an index fund beat 99.6% of all fund managers.
 
So what do we get for investing our capital in mutual funds and hedge funds? The warm and fuzzy feeling that we've contributed the liquidity needed to grease a monumental skimming operation. Ten out of 10,000 is simply signal noise; in effect, nobody beats an index fund.
 
The entire financial management industry is a rentier arrangement: they skim immense profits and return no productive yield at all. This is of course a key characteristic of the neofeudal debtocracy that is the U.S. economy: various cartels and state fiefdoms operate rentier arrangements that skim a percentage of the national income, protected by the state and endless PR from any market forces or transparency.
 

B.C.'s analysis and commentary:

Here are the most recent results for the quarter ending Q1 '13 for mutual fund managers' performance vs. the total return to the S&P 500using the Mutual Fund Screener from Yahoo Finance (data from Morningstar):

First Screen Criteria:
All funds.
Manager tenure 5 years or more.
No load.
Management fee of less than 1%.

YTD: >5%
1-yr.: >10%
3-yr.: >5%
5-yr.: >0%

Number of managers who beat the S&P 500 over the past five years: 0

Second Screen Criteria:
All funds.
Manager tenure 5 years or more.
Load less than 2%.
Management fee less than 2%.

YTD: >5%
1-yr.: >10%
3-yr.: >5%
5-yr.: >0%

Number of managers who beat the S&P 500 over the past five years: 5

The screener includes a universe of 24,711 funds, which means that those who "beat the market" were in the fifth-order Pareto distribution of 2-3 out of 10,000.

Using similar criteria for the WSJ.com Mutual Fund Screener without the option of choosing manager tenure but including Lipper relative performance to peers, load-adjusted performance, and with an A-AAA rating, only 71 funds (fewer managers because of multiple fund management by a manager) of 17,785 matched or beat the S&P 500 over 10 years.

Once again, evidence of a third- or fourth-order Pareto distribution of 2-4 out of 1,000 being "winners."

The results of the past 10-12 years during the ongoing secular bear market clearly demonstrate that the "money management" industry exists primarily, if not now exclusively, for the benefit of those who "manage" other people's money, not the investors/shareholders of the funds.

By definition "hedge" funds are no better, i.e., they hedge investors' returns to no better than cash:

Hedge Funds: Going nowhere fast (The Economist)

"The past year has been another mediocre one for hedge funds. The HFRX, a widely used measure of industry returns, is up by just 3%, compared with an 18% rise in the S&P 500 share index. Although it might be possible to shrug off one year’s underperformance, the hedgies’ problems run much deeper.

The S&P 500 has now outperformed its hedge-fund rival for ten straight years, with the exception of 2008 when both fell sharply. A simple-minded investment portfolio—60% of it in shares and the rest in sovereign bonds—has delivered returns of more than 90% over the past decade, compared with a meagre 17% after fees for hedge funds (see chart). As a group, the supposed sorcerers of the financial world have returned less than inflation."

B.C.'s commentary resumes:

That there are so many "managers" in the game with AUMM (assets under mis-management), all manner of ETFs, and now pension funds "discovering" index funds and index ETFs, all trying to match or "beat the market", is a primary reason why the overwhelming majority of " managers" will underperform and thus add no value to an investors' portfolio. 

Eventually, a growing plurality of so-called "investors" will discover that the stock market is not for wealth accumulation for the majority of "investors" but a wealth-transfer mechanism from the second 9-19% with any financial surplus to the top 0.1-1% who hold a disproportionately large share of financial wealth, and to the so-called money "managers" who benefit from fee income generated by the wealth-transfer process.

However, the resources of the financial services industry generated by fee income will continue to fund mass-media advertising/propaganda in the ongoing attempt to convince the top next 19% that they can "beat the market" if only they turn over their savings to the industry to "manage". Little do most "investors" know that they are funding the perpetuation of the industry's fraud, their own underperformance, and failing to match risk-adjusted returns of cash and fixed income after fees, taxes, and inflation over a cycle.

Now, imagine what would happen to the financial services and banking industries and financial print, broadcast, and online media were these unsanitized facts about dismal money "manager" performance to be widely reported and internalized by a significant minority or small plurality of investors or the public at large.

Thank you, B.C. In my analysis, the financial services industry is simply one of many state-enabled cartels and rentier arrangements that are immune to market forces, price discovery and the bright light of truth.

 

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Mon, 04/29/2013 - 11:35 | 3510169 firstdivision
firstdivision's picture

That's becuase Hedge Funds still believe in hedging.

Mon, 04/29/2013 - 11:42 | 3510199 slaughterer
slaughterer's picture

Dollar down.

Euro up.

Yen down.

Gold/silver up.

Most every actively managed fund is losing money today save for their long position in the holy ES.

Mon, 04/29/2013 - 11:47 | 3510213 bania
bania's picture

but an index fund doesn't send me swag.

Mon, 04/29/2013 - 11:48 | 3510224 Precious
Precious's picture

I'd be applauding but these Wall Street fucks cannot put an INDEX FUND together correctly EITHER !

Mon, 04/29/2013 - 12:12 | 3510242 hedgeless_horseman
hedgeless_horseman's picture

 

 

Wall Street Is A Rentier Rip-Off

Same as it ever was.

Gold, bitchezzz!

 

 

 http://www.realfreemarket.org/blog/2013/01/11/gold-outperformed-the-sp-500-1995-2012/

 

----------------------------------------------------------------------------------

 

Fri, 01/18/2013 - 15:01 | 3166460 hedgeless_horseman

 

 

Each month, the day before op-ex, buy the same dollar amount of gold, say $1,000. When it is cheap you end up buying more ounces, when it is expensive you buy less for the same $1,000. On average, your price per ounce is less, so your return is greater...much greater.

 

Everytime the paper-gold folks hammer the gold price before opex you can be thankful.

 

Expenses are low, as you don't need a Bloomberg terminal, phone, or even a desk.

 

You don't need to waste your life sitting in compliance meetings, and you can sleep at night because gold has never gone to zero.

 

 

Mon, 04/29/2013 - 12:19 | 3510322 tpgaynor
tpgaynor's picture

i wonder what the chart would look like if you added a comparrison with ....BRK.B

Mon, 04/29/2013 - 12:26 | 3510354 hedgeless_horseman
hedgeless_horseman's picture

 

 

Before or after the smack down?

Mon, 04/29/2013 - 13:49 | 3510609 fx
fx's picture

there is a problem with this 'study': you can't buy the S&P500! You can by some ETF on it or some index tracker or a future, but whatever "index-investment" you buy, it will give you with 100% certainty a return of less than what the SP500 'returns'. Second, there are anumber of  -mostly value investors - out there that outperformed the S&P500by a wide margin - and they didn't use hedges or short positions to achieve that. You could call that 'noise' statistically. But it may not be noise in real world, with (your own real money... ;-)

that being said, 90% of the financial industry are indeed a waste of resources and a giant burden on society.

Mon, 04/29/2013 - 12:21 | 3510335 James_Cole
James_Cole's picture

The S&P 500 has now outperformed its hedge-fund rival for ten straight years

Math wins again.

Mon, 04/29/2013 - 11:36 | 3510170 Harlequin001
Harlequin001's picture

Its a good job it's not a manipulated market whare managers make decisions based on some 'fundamental' which doesn't exist when Bennie starts printing eh...

The statistic is irrelevant.

Mon, 04/29/2013 - 11:32 | 3510171 espirit
espirit's picture

Meh, matrix metrics.

Mon, 04/29/2013 - 11:43 | 3510172 Martdin
Martdin's picture

Psssshht, I could be a fund manager... here, hold my beer!

Mon, 04/29/2013 - 11:47 | 3510210 Cacete de Ouro
Cacete de Ouro's picture

It's not all its cracked up to be, except for the large salaries....anybody can be a fund manager...like anyone can cook....some are better cooks than others though...

 

Fund managering is a case of 'look busy' here come the clients - seriously -.... there is still room for beer..

Mon, 04/29/2013 - 12:51 | 3510443 reload
reload's picture

True enough: I have some aquaintances in the fund management racket, they do very well for themselves. Rule 1 is simple enough, `do not underperform your peer group`. To avoid this they farm out chunks of money to their cronies, who in turn give them chunks to `manage`. Come year end is it any suprise they all look about the same? everybody has been scratching everbody elses back.

I am talking about long only `pension` manager types. Endless rounds of `meetings with trustees` and other excuses for trips to sporting events and expensive restaurants. Get a few politicians along for an in house lunch or two - even better, you can name drop and sound `connected`. The dim witted pension trustees will lap it up and be fooled by your aura of success and confidence.

A racket yes, but the certainty of the characters working in it, of their own importance and value is even more sickening. 

Mon, 04/29/2013 - 11:36 | 3510174 css1971
css1971's picture

So what you're saying is... All I need to do is set up a fund, track an index but say it's "actively managed" and I'll be in the money?

Mon, 04/29/2013 - 11:58 | 3510233 francis_sawyer
francis_sawyer's picture

Set up a fund, fade Goldman calls, take profits after POMO days, dumpster dive during earnings season, & BTFD... How hard can it be?... Only drawback is that no matter how much perfume you splash onto it, you never lose that funky gefilte fish smell...

Mon, 04/29/2013 - 12:02 | 3510264 optionsman
optionsman's picture

yes

Mon, 04/29/2013 - 11:37 | 3510175 JustObserving
JustObserving's picture

Wall Street is welfare for the wealthy and the well-heeled.  

Mon, 04/29/2013 - 11:51 | 3510232 Precious
Precious's picture

Bernie Madoff went to jail for consecutive life sentences only because he pissed off a particularly vengeful group of Bucks Daddies.

Mon, 04/29/2013 - 12:22 | 3510337 tpgaynor
tpgaynor's picture

No, madoff went to jail because he stole money and pissed everybody off.

Mon, 04/29/2013 - 12:30 | 3510381 James_Cole
James_Cole's picture

No, madoff went to jail because he stole money and pissed everybody off.

The latter part is true. The first part debatable, his money stealing had been known for years before it became an issue and only became an issue after he stopped being able to make payments. 

Mon, 04/29/2013 - 12:40 | 3510399 Pool Shark
Pool Shark's picture

 

 

And Corzine is walking free because...?

 

Tue, 04/30/2013 - 01:05 | 3512825 bonin006
bonin006's picture

Corzine donated almost 0.1% of the 1.6 Billion he stole, to the Democratic party. Madoff only donated about 0.001% of the 50 billion he stole:

http://abcnews.go.com/blogs/politics/2011/12/jon-corzine-obama-partner-and-campaign-financier-subpoenaed-on-mf-global-collapse/

http://www.foxnews.com/politics/2008/12/15/madoff-hefty-political-contributions-officials/

Mon, 04/29/2013 - 13:01 | 3510470 Pseudo Anonym
Pseudo Anonym's picture

no, madoff went to jail because he stole money not only from goyim but from jews as well.  for jews, stealing from goyim is virtuous, to steal from another jew is a carnal sin

Mon, 04/29/2013 - 17:19 | 3511309 Kirk2NCC1701
Kirk2NCC1701's picture

Cardinal sin, not carnal sin. Look them up.

One can land you in jail or a grave, the other in the hospital. And then maybe a grave.

Mon, 04/29/2013 - 11:36 | 3510176 HelluvaEngineer
HelluvaEngineer's picture

Stock picking makes no sense in a world where the central bankers are simply buying the index.

Mon, 04/29/2013 - 13:04 | 3510480 ipahophead
ipahophead's picture

That is exactly what I was thinking.

Mon, 04/29/2013 - 11:36 | 3510177 azzhatter
azzhatter's picture

I have a small investment with a fund manager, really small around 10K. It has returned 13% over the past 2.5 years. The rest of my portfolio is around 28% over the same period of time. These guys are a waste of oxygen

Mon, 04/29/2013 - 12:02 | 3510257 Skateboarder
Skateboarder's picture

Anything not returning > 12%/yr is worthless. I mean, you might as well go buy bonds lolololol.

Mon, 04/29/2013 - 11:39 | 3510185 Mike Cowan
Mike Cowan's picture

Even fund managers have the right to squirm.

Mon, 04/29/2013 - 11:58 | 3510187 Diogenes
Diogenes's picture

A chimp can beat the typical fund manager. This has been proven over and over again.

http://www.forbes.com/sites/rickferri/2012/12/20/any-monkey-can-beat-the...

So, if you want the best fund manager, hire a dart throwing monkey.

Mon, 04/29/2013 - 17:20 | 3511333 Kirk2NCC1701
Kirk2NCC1701's picture

It's cheaper and faster if you use the random number generator in Excel to pick stock.

If you don't know how to do that... you deserve a stock broker. /s

Mon, 04/29/2013 - 11:39 | 3510188 A Lunatic
A Lunatic's picture

You didn't profit that...........

Mon, 04/29/2013 - 11:39 | 3510189 IridiumRebel
IridiumRebel's picture

But Jim Cramer said BOOYAH! Bah bah bah BOOYAH!?!?

Mon, 04/29/2013 - 11:40 | 3510191 Seasmoke
Seasmoke's picture

Is it theft , if you willingly hand over the money to be skimmed.

Mon, 04/29/2013 - 12:14 | 3510304 Diogenes
Diogenes's picture

No. That's fraud.

Mon, 04/29/2013 - 11:42 | 3510195 Everybodys All ...
Everybodys All American's picture

Bernanke has destroyed the market. It's now more or less russian roulette.

Mon, 04/29/2013 - 11:42 | 3510197 Inthemix96
Inthemix96's picture

Fuck me folks,

I am fucking shocked.  Badly shocked that these parasites are indeed parasites.  These lot of thieving cunts are the same as section 8 housing applicants.  Whats the fucking difference from welfare for the poor and welfare for the stinking rich?

Fuck all in my opinion, let these fuckers burn.  Cunts.

Mon, 04/29/2013 - 11:44 | 3510200 Seasmoke
Seasmoke's picture

Of course. They are all in Apple.

Mon, 04/29/2013 - 11:41 | 3510204 Mojeaux18
Mojeaux18's picture

Is that really fair?

If I invest 90% in the SPY and 10% in cash I will underperform the S&P by 10% and a smidgen(expense of the etf).  The only way to really outdo that (besides not investing in all 500 stocks on the S&P ofc) would be to leverage.  Then watch as a a simple correction kills you.

Mon, 04/29/2013 - 12:16 | 3510310 Diogenes
Diogenes's picture

Warren Buffet has beaten the SPY every year since 1954 by buying the kind of stocks the typical fund manager wouldn't touch with a ten foot pole. He also keeps a few billion in cash, to take advantage of bargains when the market crashes.

Mon, 04/29/2013 - 12:57 | 3510459 reload
reload's picture

mmm - thats the theory, but is there not a mountain of evidence that he has had political help picking his winners. Not to mention plenty of bail out largesse. His star is tarnished.

Mon, 04/29/2013 - 14:31 | 3510756 Mojeaux18
Mojeaux18's picture

My point is not how good or bad the typical fund manager is (I know they're crap), but that the benchmark is unfair.  If you invest 100% SPY you'll still lose (expense on the ETF).  And if you keep any stable assests like cash or bonds you might underperfom...until the market crashes ofc.

Mon, 04/29/2013 - 18:39 | 3511578 Blues Traveler
Blues Traveler's picture

Warren Buffet was one of the largest recipients of the bailouts...still is. He is crooked like a politician.

Mon, 04/29/2013 - 11:43 | 3510207 SillySalesmanQu...
SillySalesmanQuestion's picture

Just keep churning those fees...nobody gets paid to be right or make money for their clients.

                                             Churn on!

Mon, 04/29/2013 - 11:43 | 3510208 Karlus
Karlus's picture

For some reason I thought hedge funds were supposed to have opposite cooralation to the indexes. It is your "hedge" against your main investments in blue chips, S&P...etc. That if the market went south big time you were covered.

 

I realize the "hedge" in fund is no more. I see most of these funds as merely marketing efforts. I would guess that more than a few have specific strategies they pursue as actual hedges and might be working as planned. Is it really an apples to apples comparison?

Mon, 04/29/2013 - 11:56 | 3510250 Diogenes
Diogenes's picture

The first hedge funds were so called because they were simultaneously long and short the market. In other words they hedged.

They hired an optimist to buy good stocks and a pessimist to short the bad ones, figuring the market had to go up or go down so they would wind up making money either way.

It turned out most years the market doesn't do anything radical, it goes up and down, and both the optimist and the pessimist make a little  money.

They had a better return than the typical mutual fund. But because they didn't stick to plain vanilla stock and bond buying they were considered too risky for the ordinary investor, they were for a more sophisticaled investor. So hedge funds became a class of their own.

As often happens, popularity resulted in a flood of new funds. There weren't enough super genius stock pickers to go around so their results reverted to the mean (average).

Mon, 04/29/2013 - 11:44 | 3510211 orangegeek
orangegeek's picture

Managers are focused on asset gathering (working you into giving them your money) and management fees (how to pay themselves with your money).

 

ROI?  What's that?

Mon, 04/29/2013 - 11:54 | 3510247 resurger
resurger's picture

fuck them and their funds.

Mon, 04/29/2013 - 12:06 | 3510268 Smegley Wanxalot
Smegley Wanxalot's picture

But the lady on the radio said "successful retirees had professionals to handle their money" and who am I but a mere mortal to question a nameless faceless voice on the radio who provides such useful advice.

Mon, 04/29/2013 - 12:32 | 3510387 Herd Redirectio...
Herd Redirection Committee's picture

What you need to understand is that our entire society has been set up like this.  A person need NEVER form their own opinion, there is always an expert on tap that will tell you what to make of the news, and what action, if any, needs to be taken.  Its the 'expert' based society..  Always trust the experts.

They are setting up society to fall for ONE HELL of a logical fallacy, the 'appeal to authority'. 

The game doesn't fundamentally change until people realize THE GOVERNMENT IS NOT LOOKING OUT FOR YOU.  You have been lied to about the pension you will receive, social security, medical care, everything.  I feel bad for the guys in the military, they have had more false promises made to them than most.  When they come back home, damn, are they going to be surprised.  They probably won't even recognize the place.  Ammo shortages, gold and silver supply issues...

Mon, 04/29/2013 - 17:30 | 3511369 Kirk2NCC1701
Kirk2NCC1701's picture

They market the Sizzle, and you don't get the Steak.

The original pitch on Funds was that they promised better returns than CDs, but you needed a Financial Adviser to help you pick the right one(s).

That was the theory. We all know the reality. Or, some of us do.

Mon, 04/29/2013 - 12:07 | 3510273 BurningFuld
BurningFuld's picture

I do my own "investing". Since I started in '08 I'm killin' it. Why would you give your money to someone else to steal and lose for you???

Mon, 04/29/2013 - 13:39 | 3510568 shovelhead
shovelhead's picture

Lol,

I always wondered and was amazed about this...

Ok, you're smart enough to make extra capital to invest but dumb enough to give it to a perfect stranger in the hopes that the gains will be greater than his fees and inflation combined.

Lunacy.

Mon, 04/29/2013 - 14:38 | 3510782 Mojeaux18
Mojeaux18's picture

My comapny matches my contribution to the tune of 3% to my 4% contribution.  So if I invest 4K, they match it with 3K.  So if he underperforms by 10% I'm still ahead.  Granted I'd rather invest it myself.

Mon, 04/29/2013 - 12:06 | 3510277 chistletoe
chistletoe's picture

judging by the volume figures .....

 

...or, instead, judging by the number of pink slips coming out of Goldman these days ....

 

I'd say that a few folks have figured this out already .....

Mon, 04/29/2013 - 12:08 | 3510279 Sach Mahoney
Sach Mahoney's picture

Bullish!

Mon, 04/29/2013 - 12:08 | 3510287 slightlyskeptical
slightlyskeptical's picture

They used the Yahoo fund screener. Thats all that needs to be said.

I have a 6 fund basic portfolio where all funds have beaten the S&P 500 for 10 years, and they are not the top performers in  their categories. GABSX, HRSVX, MEIAX, GFAFX, SCWFX, AEGFX.

I would be surprised if any small cap fund didn't beat the S&P during this time as well. Thats well over 1000 funds.

This article is not worth the paper it is written on (or the 1's and 0's used).

Mon, 04/29/2013 - 12:24 | 3510345 optionsman
optionsman's picture

a small cap fund would look to beat a small cap index not SP500. just saying.....

Mon, 04/29/2013 - 14:41 | 3510798 slightlyskeptical
slightlyskeptical's picture

True. But the article does not make that distinction. Every one of these funds has beaten their category as well.

The whole point is that the study is disgenuous and based on bogus data. Probably doesn't count gains paid out or something. 30-40% of comparable funds beat the S&P 500 and even more beat the SPY ETF.

Index funds can't beat the markets but they are more tax efficient.  I always believed in index funds for taxable accounts and managed funds for tax deferred accounts.

Mon, 04/29/2013 - 12:08 | 3510292 NoDebt
NoDebt's picture

Just tried to replicate the results- no dice.  Smells like bullshit to me. 

Mon, 04/29/2013 - 12:16 | 3510318 malek
malek's picture

Charles, you should add that most ETFs have also degenerated into skimming operations.

Unless you want to bet on a very short-term move (intra-day, or for massive expected moves a few days at most), never NEVER put money in a leveraged ETF anymore.

Mon, 04/29/2013 - 12:16 | 3510320 long-shorty
long-shorty's picture

why would anyone who could generate alpha run a mutual fund?

Mon, 04/29/2013 - 12:19 | 3510323 B2u
B2u's picture

Mutual funds?  I didn't know they still exist.

Mon, 04/29/2013 - 12:19 | 3510340 optionsman
optionsman's picture

since the majority cannot beat the market they offer investors to look at their record vs their peers. so its like saying that we are not the worst of the bunch is some sort of praiseworthy achievement.

but it is also true the investors dont seem to understand that in certain types of mutual funds there is very little opportunity to produce positive outperformance via security selection. what is interesting is that the mutual funds managers themselves are fully aware of it but yet do everything possible to purpetuate the myth that fundamental or bottom up analysis is their "main" method for picking portfolio holdings. such managers also have a large staff of equity and credit analysts. while their performance attribution constistently shows negative or negligible contribution to performance from security selection.

just my 2 cents.....

Mon, 04/29/2013 - 12:24 | 3510355 syntaxterror
syntaxterror's picture

You could eliminate 99% of Wall Street and nobody would notice.

Mon, 04/29/2013 - 12:26 | 3510368 topspinslicer
topspinslicer's picture

You mean the folks at cnbc aint so smart but just like flapping their lips 'cause they like the sound of their own voices?? Say in aint so Sam!!!

Mon, 04/29/2013 - 13:22 | 3510526 Oldwood
Oldwood's picture

Productivity is no longer desirable. As a matter of fact the productive amongst us are typically the fools or saps to be made fun of. Everyone knows that "winning" is wealth without work, no matter how larger or small. People investing are usually doing it for one of two reasons. They are either in it for the fast buck and the gamblers high, or they are being squeezed into it by investment specialists and virtually everyone else who is warning of wealth evaporation through the Fed's policies. Greed and fear are the two best salesmen there are.

Mon, 04/29/2013 - 13:32 | 3510554 TrustbutVerify
TrustbutVerify's picture

I compare my mutual funds to the 5 year SPY chart.  Doing so yields a whole different point of view.  

Call it "timing" but recently I've tried to buy performance combined with lower beta in my funds.  A .5 beta makes me feel better.  A 100% correlation with a market decline about now is not desired.  

Mon, 04/29/2013 - 14:09 | 3510651 LinesOnCharts
LinesOnCharts's picture

It's because schools teach these future managers that no one can beat the market in college.  Nothing about business cycles, market timing, or investment analysis...

 

And then the ignorant graduates, armed with nothing except CNBS for information, go onto underperform the market and get rewarded for it.

 

Ineptocracy/10

Mon, 04/29/2013 - 14:35 | 3510783 Kirk2NCC1701
Kirk2NCC1701's picture

Charles, Tyler, ZH, Wall St Managers and Investors,

The ONLY statistic that is even more shocking, is that I've read versions of this for 20 years, and yet, and yet...

"There's [still] a sucker born every minute."

trumps all. Judging by Wall St profits and fund mgr compensations.

Mon, 04/29/2013 - 14:44 | 3510787 Jack Burton
Jack Burton's picture

"A fool and his money are soon parted"  Giving your hard earned money to a manager to invest for you at gross fees and charges that are often not transparent? Now that qualifies as foolish. Not only are you over charged but the charges are carefully hidden in complicated small print, and if it is in large print, the charges are hidden in terms that no average person wwould recognize as charges.

I have always gone the index fund route until the markets became subject to Fed manipulation, HFT and other scams. I bailed in 2007 with the collapse in sight.

I know active managers and pension fund managers who swear that THEY are value added. Their active management is a "win" for the investor. At some point they might beat the index funds for a short time, and this is what they advertize.

Why Americans continue to buy into the financial services scam is beyond me. The evidence that a monkey throwing darts at a stock page from the WSJ have on average beat most money managers stock picks has been well known since the early 80's when this experiment was done.  Yet, I have friends and family who are sucked into actively managed high fee 401K fund choices. I know retail investors who visit their financial advisor weekly to be put into stocks and funds that are high fee, plus the advisor's fee, plus the cost of each trade. But in their minds, by being active, they think they are beating the market. Wrong!

Nothing changes, fools with money can't seem to give it over to the skimmers on the street. The whole game is rigged now. The bankers and their HFT computer systems. The insiders who front run every bit of information that can affect stock prices. Banks using printed Fed money at ZIRP to manipulate stocks for their own trading benefit. The US stock markets are totally manipulated by an elite. Government aids this manipulation. And the center of the axis of evil resides in the banker owned Federal reserve who uses it's powers to aid the giant scam. Once Americans were sucked into the 401K, a whole ocean of worker's money became available to be skimmed and scammed out of the holders pockets. Is it any wonder that a majority of workers have 401K's and that a majority of workers have little or no retirement savings? No, no coincidence at all! The scammers are cleaning up, the 1% is getting all the income gains, because the 99% let the scammers have their retirement savings to play with and to harvest.

The path to ruin is paved with the 401K for the average to stupid too know they are being robbed workers.

Mon, 04/29/2013 - 18:29 | 3511554 Accounting101
Accounting101's picture

So where in the hell should I invest? If I clear out my Roth which contains investments in American Funds, where do I go with the money? Please don't encourage me to buy coins, virtual or otherwise.

Mon, 04/29/2013 - 18:41 | 3511596 billsykes
billsykes's picture

"The whole game is rigged now."

always was its just a compounded way to fuck over the small guy. And its too bad, the market could be a good(ish) place, efficient, transparent, companies held to the highest standard, etc. But when you screw over the money supply and debase it- you are going to get more of this.

  

Mon, 04/29/2013 - 15:22 | 3510929 slightlyskeptical
slightlyskeptical's picture

Bottom line is that the major factor in investment success is not whether you choose index funds or managed funds. The biggest factor is if you are in the market or not.

Mon, 04/29/2013 - 16:04 | 3511093 snblitz
snblitz's picture

My Mom is permanently wedded to Fidelity.  What do they tell her that keeps her a believer?

Mon, 04/29/2013 - 17:39 | 3511395 Kirk2NCC1701
Kirk2NCC1701's picture

51% of the time they are right.

E.g., in my case they advised me last Fall to not borrow from my IRA and invest in PM, because PM could go down and stocks could go up. Guess what I did and what happened?

Mon, 04/29/2013 - 17:44 | 3511389 dolph9
dolph9's picture

Not only are mutual funds mostly BS but index funds are as well.  In order to make a return, there would have to be infinite economic growth, which is impossible.

The Wall Street guys, well, they just want to make as much fiat as possible and get out of the game by converting the fiat into income producing assets, and let the central banks inflate the prices of those assets.

The suckers in the whole equation are every last person on this planet doing productive work to earn an income.  That's 6 billion people give or take.  The rest are dependents (children or disabled or elderly) and the financial services industry.

Mon, 04/29/2013 - 18:37 | 3511568 billsykes
billsykes's picture

And all these cocksuckers talk and act the same, like they are kings of the fucking world with more money and success than god. All get that faux concerned crossed arms look and think they know everything about every business on the market. And then ask questions where they know the answer and it is no- its fun to rip to shreds a prospectus. "we don't invest in that, it topped years ago". Oh- why is your name top left on that 100m IPO in XX?...

 

Some of these guys you would think just bury their clients money in the ground. 

 

 

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