Re: Is the stock market +EV?
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Repeat after me... Mutual Funds play a different game than individual investors!
You presume that the goal of most mutual funds is to beat the market.. it is not!
You presume that it is just as easy to achieve a high rate of return on $1 Billion, as it is on 100 Thousand... it is not!
You presume that a mutual fund manager can do everything in the market that an individual investor can do... he can not!
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While I agree with everything else Sniper has written here, he's guilty of a little hyperbole in saying that beating the S&P 500 isn't a goal of actively managed mutual funds. That's the route to riches, see Bill Miller for a great example. But Sniper is right in that the primary goal of mutual funds is to get clients to invest more so the fund can make more money.
And whether it's their goal or not, most of them can't beat the S&P500 (after fees). As Sniper has pointed out, the structure of mutual funds are horribly restricting. Many good money managers go the private investment fund route (hedge funds) because it allows them to take off some off the shackles of mutual funds.
Private funds typically have performance fees so that good managers are rewarded, while mutual funds typically get the same percentage whether the fund is up or down.
That means while beating the SEP 500 is A goal of mutual funds, their highest priority is to add clients money. They'd much prefer to trail indexes while getting more clients to invest more money, then to beat the index as a closed fund.
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