Investors are always looking for the latest stock tip or idea to win big. It's nearly an urban rite of passage to sit around with friends and family and listen to Uncle Buck tell you all about his latest investment and success. Yet, everyone knows Uncle Buck is ‘always’ on the brink of bankruptcy. Word to the wise, don’t listen to Uncle Buck.And yet, there is another piece of data you should ignore: that is the latest investment tip from just about any source. Why? The reality is once you hear about the latest investment, whatever money is to be made, has likely been made.
National publications love to write all about the latest hot mutual fund because it gets eyeballs...advertising revenue...investors then pile their money into the fund and hope for riches. However, studies on mutual funds suggest this approach could make retiring on time more challenging.Dimensional Fund Advisors based in Santa Monica, CA has been studying mutual funds and their likelihood of survival and out performance for years.
Take Home: The research is pretty conclusive...wait for it...the truth is most mutual funds don’t survive and don’t beat their benchmark.
Key Fact: At the beginning of Dimensional’s study there were 3097 mutual funds considered in the sample. After 10 years only 59% survived and only 21% beat their respective benchmarks
Key Fact Restated: 41% of mutual funds won’t exist 10 years from now and 79% of those mutual funds after 10 years didn’t do what they said they would!
Sonoma Wealth Advisors is a registered investment adviser and only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. The information presented is for educational purposes and believed to be factual, but we do not guarantee its accuracy and it should not be regarded as a complete analysis. All expressions of opinion reflect the judgment of the author/presenter as of the date of publication and are subject to change and do not constitute personalized investment advice. An investment adviser representative should be consulted directly before implementing any investment strategy. Investments are subject to market risks and the potential loss of the entire principal amount invested. Past performance is no guarantee of future results.