Re: Why Mutual Funds are better than Index Funds
You still fail to see the key problem IMO with mutual funds. Someone can easily outperform the market with a couple hundred million in assests. After that the fund is heavily marketed and people dump in tons of cash so the fund could go from maniging 200 million to 2 billion. Cash flows into the fund faster than it is able to be invested so it sits around earning very low interest rates which will drag the funds performance down in the near future. Then the fund manager is faced with not being able to find enough companies to invest in that will provide for a high return. That cuts down the funds long term performance.
The fund managers are faced with playing split pot poker with a 10% no max rake and only have enough time to play 20,000 hands.
|