The Track Records Of Mutual Fund Managers Essay

The Track Records Of Mutual Fund Managers Essay

Length: 903 words (2.6 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

A wide grin spread across my face as I proudly announced to my finance professor, “I’ve been saving up for a year, and I’m finally ready to start investing real money in stocks.” Despite my enthusiasm, he surprised me by replying, “Be careful. Speculating is really risky. You should look into indexing.” I took a step back and tried to make sense of the situation. This very professor has been teaching me how to handpick stocks and valuate them based on forecasts, i.e. speculate. Yet the same professor was telling me not to trade based on speculation. I was dumbfounded. This sprung my curiosity, and inspired me to read a handful of the best investment books ever written. Even if his advice seemed counterintuitive at first, in hindsight it was the best investment advice I had ever gotten.

Indexing is proven to attract a larger top line than speculating, and as a finance student, I greatly appreciate that. The track records of mutual fund managers, i.e. professional speculators, are publically available. For instance, in 2014 86% of all U.S. large-cap funds performed worse than the S&P 500 index, meaning they failed to serve their very purpose.1 The results have been just as disappointing decade after decade. In a twenty year time period from 1993-2013, the S&P 500 Index averaged 9.22% per year, while the average mutual fund lagged behind at 8.36%.2 What if you only invested in the best performing mutual funds, hoping that their superior performance would continue? Well in 1968, the number one fund was the Mates Fund. But if you invested in it, your investment would have lost 93% of its value by 1974.2 Each decade’s top funds tend to be the worst performers of the next decade.2 Obviously every year, without fail, some fund is bound t...

... middle of paper ...

...rhaps it’s due to a conflict of interest. By pushing their expensive mutual funds, they can pocket 2-3% commission. Whereas if you invest in index funds, the only winner is you. More and more individuals and institutions are understanding the benefits of indexing and are reaping their rewards.
My finance professor’s advice has completely changed my investment decision. Instead of falling into the glamour of speculating and risking my savings, I chose to responsibly invest in indexing, since it’s statistically proven to be superior. As a result, I can expect higher profits, fewer costs, more free time, and have greater financial security in my future. When someone with all the right training to speculate, like myself, steps down and makes an informed decision to surrender to the more rational choice of indexing, I hope it speaks very loudly on the merit on indexing.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Mutual Funds Essay

- Mutual Funds, Bill Miller, and Value Trust Value Trust, an $11.2 billion mutual fund managed by Bill Miller III, and one of a family of funds managed by Legg Mason., a leading Global Asset Management Firm headquartered in Baltimore, Maryland has achieved uncanny success. The Fund invests primarily in large-cap equity securities, is benchmarked against the S&P 500, and as of 2005, has outperformed its benchmark for a record 14 consecutive years. This amazing streak has brought much attention to this highly rated fund and what exactly is behind its excellent success and management....   [tags: Business Finance Investing]

Free Essays
709 words (2 pages)

The Behavior Of Mutual Fund Essay

- The Behavior of Mutual Fund Managers and Investors Executive Summary The behaviors of mutual fund managers and the investors have been the subject of study in behavioral finance. The objective of the study is to determine whether there exists any relationship in the behaviors of the two parties to the mutual fund engagement. The study is based on the prospective theory and uses the cross-sectional research design to meet two research purposes. The two research purpose include to investigate whether there is granger causality between the behavior of the fund managers and the behavior of the investors and secondly, to investigate whether the relationship between the two variables can be used t...   [tags: Mutual fund, Investment, Finance, Hedge fund]

Better Essays
709 words (2 pages)

Corporate Fund : A Mutual Fund Essay

- A mutual fund is an investment vehicle in which investor’s pool their resources together to invest in multiple different debt and equity instruments. They are operated by mutual fund managers who attempt to create a diversified portfolio, while still trying to achieve capital gains on the assets in the fund, paying close attention to the investors’ appetites for risk. The goal of a mutual fund is to pool multiple investor’s funds together so they can be invested at a level higher than any one investor could achieve on their own, with the end game being returns that can be enjoyed by all in a “mutual” benefit system....   [tags: Investment, Mutual fund, Hedge fund, Finance]

Better Essays
765 words (2.2 pages)

Mutual Fund : A Fund Essay

- A „Mutual Fund‟ is an investment vehicle for investors who pool their savings for investment in diversified portfolio of securities with the aim of attractive yields and appreciation in their value. The investment managers of the funds manage these savings in such a way that the risk is minimized and steady return is ensured. As per Mutual Fund Book, published by Investment Company Institute of the U.S., “A Mutual Fund is a financial service organization that receives money from shareholders, invests it, earns returns on it, attempts to make it grow and agrees to pay the shareholder cash on demand for the current value of his investment.” 90 Securities and Exchange Board of India (Mutual...   [tags: Investment, Mutual fund, Bond, Hedge fund]

Better Essays
1554 words (4.4 pages)

The Management Of The Lic Mutual Fund Essay

- The LIC Mutual Fund was set up by the LIC of India in June, 1989 with the objective of mobilizing savings of people especially from rural and semi-urban areas and improving their income ensuring at the same time safety, liquidity and security of their investments. The Fund continued to work towards realizing these objectives. The Assets under Management (AUM) of LIC Nomura MF AMC Ltd. stood at Rs. 6112.16 crores as on 31st March, 2013 with a market share of 0.86%. Mutual Fund Industry‟ AUM as on 31st March, 2013 stood at Rs....   [tags: Investment, Bond, Mutual fund, Hedge fund]

Better Essays
937 words (2.7 pages)

Benefits Of A Mutual Fund Essay

- The investment of money is essential to attaining many goals throughout our lives. Parents are able to carefully save and grow money for their children’s future education, individuals can put away money that will eventually be utilized for the purchase of a new home, yacht or business, and families can save for the golden years of life—retirement. Whatever the end goal may be, there are many investment vehicles that can help get you there. One such vehicle is a mutual fund. Mutual funds, as defined by the SEC, are companies that pool money from many investors and invest that money in stocks, bonds and other securities or assets....   [tags: Mutual fund, Investment, Hedge fund, Open-end fund]

Better Essays
1208 words (3.5 pages)

Indian Mutual Fund Industry : An Overview Essay

- MUTUAL FUNDS – AN OVERVIEW To state in essential words, a typical resource accumulates the store reserves from minimal money related experts, place them in Government and other corporate securities and win pay through premium and benefits, other than capital expansion. It takes a shot at the standard of" little drop of water makes a noteworthy ocean '. An open-end resource is one that is available for enrolment all as the year advanced. These don 't have a changed advancement. Theorists can accommodatingly buy and offer units at Net Asset Value ("NAV") related expenses....   [tags: Hedge fund, Investment, Mutual fund]

Better Essays
1287 words (3.7 pages)

Evaluating The Performance Of Mutual Funds Essays

- EVALUTATION OF MUTUAL FUNDS: In India, currently, there square measure many of the mutual funds are jointly investment companies operating each within the public sector yet as within the private sector sector. These contend with alternative one another for mobilizing the investment with individual investors and other organizations appetent of inserting their funds with these non-depository financial institution investment company would really like to grasp the comparative performance of every thus on choose the simplest mutual fund or investment company....   [tags: Investment, Mutual fund, Hedge fund]

Better Essays
909 words (2.6 pages)

Essay about Questions On Financial Goals And Corporate Fund

- SUGGESTIONS Financial goals differ, based on Investors age, lifestyle, financial independence, family commitment and level of Income and expenses among several other factors. Therefore, it is necessary for Mutual Funds Companies to evaluate the consumer’s need. They should begin by defining their investment objectives and requirements which could be regular income, buying a home or finance a wedding or education of children or a mixture of all these needs, the huge risk, they are eager to take and their cash flow requirements....   [tags: Investment, Mutual fund, Finance, Hedge fund]

Better Essays
713 words (2 pages)

Essay on Notes On Types Of Mutual Funds

- Types Of Mutual Funds Learn about the different Types of Mutual Funds in this mutual fund tutorial. Which mutual fund is right for you. Asset Allocation Asset allocation refers to the division of your portfolio to different asset classes such as money-market securities, bonds, stocks and their appropriate subcategories. An asset allocation fund follows this principle by holding several asset categories. One of many Types Of Mutual Funds. Balanced Funds These funds invest in a combination of bonds and stocks of various sorts depending on their stated objectives....   [tags: Investment, Bond, Mutual fund, Stock market]

Better Essays
1510 words (4.3 pages)