why mutual fund managers lose 90 percent of the time?

Discussion in 'Stocks' started by z32000, Mar 22, 2007.

  1. z32000


    What advantages does a small investor have over a fund manager?
    A friend of mine was having this discussion. They keep telling me, you're only new at investing. You might as well just have your investments in a managed funds account.
    I'd like to think, the more time invested into something...the more you get out...but this is coming from a newbie.

    So the question arises, is there a big chance i can beat the odds "consistantly"? I guess, if the stock market is pretty much a zero sums game in that there is a winner for ever loser and via versa.... surely, if I tend to be losing a lot of money... then all I really need to do is do the opposite so I would gain..with consideration of spread/commission costs.

    I read in magazines that probably 90 percent of mutual fund managers can't beat the market.... I'm trying to understand this... i would have thought that if the market was close to a zero sum game... then shouldn't it be close to 50/50?
  2. Dustin


    There's a big difference between losing money and not beating their benchmark. Therein lies your answer.
  3. fees
  4. "What advantages does a small investor have over a fund manager?"

    Not to diversify.
  5. You'd think doing the opposite would work, but the problem is that you have to go against your gut instinct of what you thought was "right", to now doing what is "wrong" in the belief that taking the other side of the trade would have resulted in profit. Pulling the trigger when your confidence is low, is a lot harder.

  6. z32000


    (i should have stated fully managed funds to begin with instead of mutual funds)

    I guess if I can take back my question and direct it to a small investor versus a funds manager who fully manages your investment... i would think that these fund managers have a better understanding as to when to go short or when to completely invest their funds in a stock. Yet the failer rate is still not 50/50....

    I guess some might even daytrade or swing trade.... is there a disadvantage on their end such that say...

    maybe having too much money to invest with can be a negative to a certain degree??

    One disadvantage that I can think of is that fund managers sometimes need to show gains in the short term (despite knowing the only gains maybe in the long term) in order to get the interest of more potential clients.
  7. Funds trade in sizes too large to just flip them in a few days.
  8. You can sell all your positions, short, and use leverage.

    Institutions can't because of the law.
    They basically stay-on all the time.

    Imagine if you forecasted a downtrend or correction, but what for, if you can't get out or short?
  9. The manager runs a bear fund. :D
  10. Imagine if you forecasted a downtrend or correction, but what for, if you can't get out or short?

    (cough, cough,) you didn't say Enron employee, did you.:eek:
    #10     Mar 22, 2007