The Best Managers Don’t Stay on Top

by brendon on July 17, 2013

Great investment advice for Kansas City and Overland Park investors is this:  use passive-management investment strategies and avoid active-management.  Understand that if outperformance by active mutual fund managers was truly due to skill, you should see the best performers stay at the top from one period to the next. However, a report by Standard & Poor’s shows that the “best” don’t repeat more often than chance would suggest.

Rating services such as Morningstar tout top performing mutual funds in all categories by assigning star-ratings.   The problem:  making an investment choice based on the past track-record.    Don’t do this!  Instead, ALWAYS, ALWAYS, ALWAYS remember that returns come from the market—not a manager.

Your investment portfolio needs to capture returns from the market by investing into multiple asset-classes with dissimilar price movements and low internal turnover due to buying and selling.  We structure or engineer investment portfolios to capture specific rates of return with academically measured amounts of risk.  Systematic rebalancing insures a disciplined approach to buying low and selling high too.

For more evidence why you shouldn’t invest using active-management strategies, CBS Moneywatch contributor Larry Swedroe writes a great article covering the topic.   Click here to check it out.  

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