> What does that mean? That 9 out of 10 mutual funds return less than the average improvement in the Dow?
Yes, and this or something near it is a fact (http://business.time.com/2009/04/20/breaking-news-mutual-fun...). Although the underperformance typically comes from management fees, because we would expect mutual fund portfolios to average with the market. But then you have to pay the managers and analysts.
Generalizations are OK when they are true and backed up by scientific data.
The oft-cited statistic that mutual funds do not return as much as the dow ignore the concept of risk-adjusted returns. A mutual fund very well should return less than the dow if it takes upon lower risk. (However you might define risk, there are many definitions, volatility only being one.) The article presumes the goal of every investor is to maximize return vis a vis some arbitrary benchmark.
A stock-based mutual fund might actually be doing its job if it is simply not losing money when the dow surges since it's goal might be diversification via non-correlation by long-shorting the market.
There is of course some truth to the fact that mutual funds often do not earn their fees. But simply saying they cannot "beat the market" overlooks important questions about what those funds actually set out to do in the first place, and what their respective risk-taking philosophy was.
Of course, please perpetuate this nonsense, as it makes life easier for those of us who are investing relying upon it.
Yes, and this or something near it is a fact (http://business.time.com/2009/04/20/breaking-news-mutual-fun...). Although the underperformance typically comes from management fees, because we would expect mutual fund portfolios to average with the market. But then you have to pay the managers and analysts.
Generalizations are OK when they are true and backed up by scientific data.