What are the right Investments?

The Wall Street Journal stated that 45% of all actively managed stock, bond and other mutual funds were beating their benchmarks as of February 28 (for 2017).

However, that means 55% of these funds failed in their attempt to beat their benchmark. Not too impressive!

Eight years ago, in 2009, was the last year that even half of all active funds beat their benchmarks, according to Morningstar.

In 2016, only 31% of actively managed funds beat their benchmarks.

Let’s explain this, just so you are clear. Active management means that professional money managers who are paid from their clients’ assets try, but cannot consistently outguess and outperform their respective benchmark.

Based on years of industry data like these statistics is why we recommend investing by NOT using active managers. It is a losing game.

Also, if you invest in individual stocks, you should check your portfolio’s performance against an appropriate benchmark, to see how well you are doing.

This is why we utilize asset class stock mutual funds, which for simplicity sake are a version of index funds, and not actively managed stock mutual funds.

Our investment philosophy provides you with a better, proven method to achieve higher returns, at a lower cost and are more tax-efficient, in an uncertain world.

These are some of the advantages of using the asset class stock funds we recommend, over actively managed stock funds:

  • They perform better. Over the long-term, they generally meet or exceed their benchmarks, which is excellent comparative performance. Once you do the research we have done for years, you will appreciate that these type of funds provide you with long-term top tier performance.
  • The mutual funds we utilize provide tax management to provide you with better after-tax returns. It’s not just about performance; it’s about what stays in your pocket, or after-tax performance.
    • Most actively managed stock funds are not cognizant or actively managed to reduce your taxes. The funds we recommend for your taxable accounts are actively taking steps to reduce the tax impact of the fund, if it is tax-managed.
  • They are significantly cheaper than most active mutual funds, generally by at least 1/3 the cost. We can structure a globally diversified stock fund portfolio for approximately .30%. The mutual fund average is 1-1.25%.
    • Why not start with lower costs, if you can, especially if the funds already provide excellent long-term performance records versus their peers?
  • They have far lower turnover. The funds we recommend generally turnover their portfolios far less than industry averages. A fraction of most actively managed funds.
    • Active funds with higher turnover mean more trading costs and it is likely a fund may generate more taxes for their shareholders.
    • Also, if you think about it, if a fund starts the year with a set of “picks” and has 100% turnover during the year, this means they replaced most/all of their holdings. Does that make sense to you?
  • The funds we utilize have a team management approach. Most actively managed funds rely on one or a few managers and unnamed analysts. You may not know when a manager or analyst, who generated ideas, has left or been replaced. The team approach utilized by our funds helps to ensure better long term management, training and experience.

There is a better way. If you are a client, you know that our recommendations give you the best opportunity for long-term success, by providing you with investment funds that have very good long-term performance, at very low costs and are tax-efficient, as applicable.


Source, Wall Street Journal, “Active Managers Make a Comeback,” dated April 3, 2017, which cited Morningstar data.

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