Comments on: You aren’t good at picking mutual funds! http://www.iwillteachyoutoberich.com/blog/you-arent-good-at-picking-mutual-funds/ Personal finance blog for college students, recent graduates and everyone else -- including entrepreneurship -- for getting rich. Featured in the Wall Street Journal and New York Times. Sun, 21 Mar 2010 02:45:13 -0700 http://wordpress.org/?v=abc hourly 1 By: Andre Nyffeler http://www.iwillteachyoutoberich.com/blog/you-arent-good-at-picking-mutual-funds/comment-page-1/#comment-28450 Andre Nyffeler Mon, 06 Aug 2007 16:28:23 +0000 http://www.iwillteachyoutoberich.com/blog/you-arent-good-at-picking-mutual-funds#comment-28450 I agree that on the whole index management outperforms active management. I also understand the excerpt and agree that index funds are generally the best way to start investing. However, I also think it's realistic for someone to do some due diligence and pick a mutual fund that is likely to outperform its benchmark. Many studies support a lack of persistence in mutual funds for all but the worst performing mutual funds. (http://www.altruistfa.com/readingroomarticles.htm#Persistence) However, much recent research has supported persistence in mutual funds, particularly in the following article. Do Winners Repeat with Style by Roger Ibbotson http://papers.ssrn.com/sol3/papers.cfm?abstract_id=292866 "Our data of domestic equity mutual funds indicates that winning funds do repeat good performance...the highest persistence is exhibited by funds whose alpha is greater than 10% and also by funds whose alpha ranks in the top 5% of the sample." This is a recent paper (2002) by a definitive researcher (sold his financial information firm to Morningstar for tens of millions and is highly regarded by his peers and the industry). In essence, I agree with everything you said but would like to add this relevant and potentially harmful info. I agree that on the whole index management outperforms active management. I also understand the excerpt and agree that index funds are generally the best way to start investing. However, I also think it’s realistic for someone to do some due diligence and pick a mutual fund that is likely to outperform its benchmark.

Many studies support a lack of persistence in mutual funds for all but the worst performing mutual funds. (http://www.altruistfa.com/readingroomarticles.htm#Persistence) However, much recent research has supported persistence in mutual funds, particularly in the following article.
Do Winners Repeat with Style by Roger Ibbotson
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=292866
“Our data of domestic equity mutual funds indicates that winning funds do repeat good performance…the highest persistence is exhibited by funds whose alpha is greater than 10% and also by funds whose alpha ranks in the top 5% of the sample.”
This is a recent paper (2002) by a definitive researcher (sold his financial information firm to Morningstar for tens of millions and is highly regarded by his peers and the industry).
In essence, I agree with everything you said but would like to add this relevant and potentially harmful info.

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