With years of less than average performance (compounded) and marketing budgets that would eclipse make Channel blush, the mutual fund industry took it broadside this weekend.
David Swenson, author of the phenomenal book Pioneering Portfolio Management, wrote an editorial in the New York Times called The Mutual Fund Merry Go Round.
Swenson knows much about manager selection: he’s the CIO of Yale’s Endowment. Swenson offers: “Why isn’t there more of an outcry? Investors naïvely trust their brokers and advisers. Most understand too little about financial markets to make informed decisions, intervene too frequently in counterproductive ways and gather too little information about portfolio holdings to evaluate results. Investors like to believe they are doing well, even when they are not.”
Relative performance, as opposed to absolute performance, will keep you eating government, grilled cheese sandwiches.
Most advisors are not worth the 1% management fee they get. They are parroting what they’ve heard someone else say. They are by no means portfolio managers. What boils my blood most is that they are taught to diversify and walk away. Diversification is the extend of risk management in a wirehouse. What a joke. Trading is knowing how to manage risk. That’s it. Learn to trade so that you can at least keep your losers small.
Investing in equities is not worth the downside risk if you are intelligent enough to know where to look for the risks. Stocks may be cheap by some historical standard, but they can get cheaper and the values can get much better as the prices continue to drop. Then you have to deal with the dead money…
You will know where to look on October 6.
Inner Voice of Trading is endorsed by Bill Dunn and Victor Sperandeo, to name a few.
The foreword is written by Ed Seykota.