Managed money - a fraud on the market?

Try to find an advisor who can beat the indices. Good luck with that

Over the last 15 years, only one active fund manager turned in performance that beat market indices out of thousands of so-called “experts” who all charge clients to “manage their money”. All those clients would be ahead if all they did was buy units of an income fund or ETF. Think about it. Expert stock pickers are expert at picking clients, not investments. Your aren’t really their client, you are their prey.

Over a short period, say one year, advisors who (by chance) pick one or two of the tech darlings who have flown in that year will have good looking outcomes.

Few did, and their longer term records is pretty sad based on the Bloomberg article linked in the first paragraph. The one active manager who did beat the indices did so by being inactive - choosing undervalued stocks and keeping them rather than trading them. That is the only strategy that works and is has served me well, letting me outperform the indices on average since I began investing in 1971. It has worked for Peter Lynch, for Warren Buffett and for Stanley Druckenmiller all of whom trade infrequently, buy out of favor companies with good businessess and robust balance sheets, and keep those holdings for long periods.

When you watch Bloomberg, BNN, MSNBC or CNBC and listen to the hordes of talking heads using terms like “hot picks” “action” “going higher” “momentum” or “a conviction buy” understand those terms are “nudges” (a term coined by Nobel laureate Richard Thaler and Cass Sunstein in their classic book by the same name) to urge you to trade, despite their knowledge and now yours that your trading will in aggregate be no more than a transfer of wealth from you (you, meaning all ordinary investors) to them (them meaning sell-side fund managers, brokers, advisors and the entire crop of people who suck millions out of investor returns for “advising” investors how to “beat the market”. It is a scam.

If you want to build pension income or save up for a home and enter the market, do you homework, buy into out of favor companies you recognize for their good products or services and have a track record of success, and put the shares in a notional drawer. You will do better and pay less to outsiders for their claimed “expertise”. If you feel inacapable of identifying out of favor but well run and robustly financed companies in industries that grow with the economy, buy units of an indexed fund.

Good luck with your investments. You will need it if you decide to let someone else manage your money.