Fact: Most Fund Managers Are Underperforming
Did you know that most professional fund managers cannot beat their market benchmark? In a study done from 1984 to 1998 – a full 15 years, only eight out of 200 fund managers managed to beat the S&P 500 Index’s performance… That’s a whopping 96% of underperforming fund managers!
In case you thought that was just a once off case, it is worth noticing that 84% of mutual funds did worse than their benchmark in 2011!
In that same article, it was also highlighted that:
- 56% of mutual funds lost out to their benchmark over the last 3 years (2009 – 2011)
- 61% of funds underperformed over the last 5 years (2007 – 2011)
- 57% of funds underperformed over the last 10 years
- Even in their best year (2009), 42% of funds still fail to beat the market!
It’s actually an open secret that “professional” fund managers generally underperform the market benchmark.
So if you are currently invested in any mutual funds, there’s a 60% chance that you are actually losing out to market performance!
However most banks and fund houses understand that having a huge marketing budget and persuasive sales staff would be able to help many of their clients forget this fact and keep investing their money with them.
Perhaps what’s most infuriating is that these fund managers still have the cheek to charge you sky high fund management fees for their underperformance!
Invest Like Buffett, Effortlessly
In fact, the world’s most successful investor aka Warren Buffett was so convinced that actively managed funds never outdo market performance that he decided to place a $1,000,000 bet challenging any hedge fund to beat the market over the span of 10 years.
Protégé Partners picked up the bet and they are currently into their 7th year of the bet. The famous investor is betting on a low cost index fund (which mirrors the market performance) while Protégé’s pick is an average of 5 funds, carefully selected just for this contest.
The results? Buffett is currently is in the lead. The index fund is up 43.8% at the end of 2013 while Protégé’s fund of funds gained only an estimated 12.5%.
So How Do You Outperform Professional Hedge Fund Managers?
Do what Buffett did.
Invest in a low cost index fund (also known as ETF) that tracks market performance. It used to be tricky getting access to such ETF funds. Luckily for you, now anyone can invest in these funds with POSB Invest-Saver, OCBC Blue Chip Investment Plan or POEMS Share Builders Plan.
With an amount as little as $100 a month, you can also beat the professional fund managers at their investing game!
What’s more, it is so easy to invest in these funds. All you need to do is to sign up at any POSB or OCBC ATM!
Hot Tip: If you really want to make your returns grow exponentially, go one step further by investing via POEMS platform – they are the only one that allows you to reinvest your dividends.
Image Credits: kmmsam.com