How Many Mutual Funds Routinely Rout the Market? Zero
Yesterday, a column in The New York Times captured my views so well that it’s not worth writing my own post. Jeff Sommer wrote “How Many Mutual Funds Routinely Rout the Market? Zero.”
Here’s the gist of Mr. Sommer’s article:
If all of the managers of the 2,862 funds hadn’t bothered to try to pick stocks at all — if they had merely flipped coins — they would, as a group, probably have produced better numbers. Instead of two funds at the end of five years, basic probability theory tells us there should have been three.
In other words, active money managers aren’t even as good as a coin flip.