Comments on: Evaluating Mutual Fund Performance

By: Kyle

Kyle — Wed, 13 Oct 2010 21:47:58 +0000

Anthony, most sophisticated investors may very well look at portfolio managers as key players. But it’s also true that most sophisticated investors don’t outperform their benchmarks. So what does that say about the wisdom of copying their methodology? Study after study after study after study after study has shown there is no long-term persistence of risk-adjusted mutual fund returns. I’ve never seen a study that actually supports performance persistence.

By: Anthony DuBon

Anthony DuBon — Wed, 13 Oct 2010 20:23:51 +0000

I agree with Daddy Paul and Hassam. Past performance is key information when evaluating investments. Most sophisticated investors look at the portfolio managers as the key players. They are key. They may manage the fund by themselves, or they may lead and manage an organization.

Hassam’s analogy to a highly performing athlete is an excellent one.

The analogy that I use most often is that funds organizations are decision making machines. Their decision-making capability is the bottom line result of people, processes, approaches, and tools that they use every day to make decisions. Good fund make good decisions day after day, quarter after quarter, year after year. The mutual funds that do this are demonstrating persistence, the tendency to produce superior results with higher return and lower risk than the market which can be represented by the S&P 500 index. Mutual funds with high persistence may not hit home runs every year, but they are likely to produce higher returns at lower risk than the S&P 500.

Investors should consider all the information available before playing it safe by investing only in index funds. Many actively managed funds are available that will outperform index funds. A tool that provides free analysis of persistence in risk – return behavior is available at http://www.FundReveal.com.

By: Hassam

Hassam — Wed, 20 Jan 2010 07:59:48 +0000

I agree with Daddy Paul, past performance can be used to expect a good performance in the future. It is just like a star tennis or golf player performing consistently. Warren Buffet has consistently outperformed the market. I thinks ETFs are much better than mutual funds as an investment.

By: Daddy Paul

Daddy Paul — Wed, 20 Jan 2010 04:09:18 +0000

Kyle I must disagree with this statement.
“Don’t Put Much Faith in Past Performance”
A manager such as Mario Gabelli or Chuck Royce who outperform the market year in and year out will most likely do it again this year too.