Quotes About Mutual-fund

The mutual-fund industry sits at the center of a massive market failure. The asymmetry between sophisticated institutional providers of investment management services and unsophisticated individual consumers results in a monumental transfer of wealth from individual to institution.

I thought a company that provides mutual-fund information could be a great business, because you could construct an effective moat by building large financial databases and customer lists and a strong brand name.

The management of taxable mutual-fund assets without considering the tax consequences of trading activity represents a highly visible, yet little considered scandal. A serious fiduciary with responsibility for taxable assets recognizes that only extraordinary circumstances justify deviation from a simple strategy of selling losers and holding winners.

Well-constructed academic studies confirm the theoretical premise. Robert Arnott's 2000 examination of U.S. equity mutual-fund returns shows a twenty-year pre-tax deficit of 2.1 percent per year relative to the result achieved by investors in Vanguard's 500 Index Fund. Nearly 80 percent of actively managed funds failed to reach Vanguard's market-mimicking return.

The aggregate of the compensation paid to mutual-fund managers virtually guarantees that investors fail to achieve market-beating results.