Thursday, March 15, 2018

The Case Against Actively Managed Funds,1953

Sixty-five years ago, as now, there were those who believed that mutual fund managers failed to earn  their keep.

This example comes from a review of Louis Engel's How to Buy Stocks. in the  April 20, 1953 edition of The New York Times:
[F]rom 1937 to 1950, fourteen of the biggest and best known mutual funds whose assets were wholly invested in common stocks showed a net gain on their holdings of only 2.2 per cent…. In contrast, the Standard & Poor’s index for ninety representative stocks showed an increase during this same period of 4.1 per cent.

2 comments:

Jim Gust said...

So if the fees and expenses of the mutual funds were 2.0%, they beat the S&P by 0.1% before fees. Seems about right.

That was long before index funds were a choice.

JLM said...

Before indexing, the cheapskate investor bought 20 well diversified stocks and achieved much the same result.