19 of 20 Pros are worse that Monkeys with DartsThis is something to always think about. If anyone is waiting for Goldman Sachs to reccomend RNKLF first before buying read this. BTW I have had mutiple 20 baggers and not one had a buy ratng when bot them. Fund managers and Analysyts are about the same on their records.
Roughly 1 in 20 actively managed domestic funds beat index funds
https://www.marketwatch.com/story/why-way-fewer-actively-managed-funds-beat-the-sp-than-we-thought-2017-04-24
CHAPEL HILL, N.C. (MarketWatch) — Beating the market turns out to be even harder than we thought.
And that’s saying something, since everyone already knew it was incredibly difficult.
According to a just-released research report from Standard & Poor’s, the statistics we’ve all been using to assess the likelihood of beating the market are biased in favor of success. Correcting that bias is therefore crucial if we are going to base our investment strategies on an accurate assessment of the facts.
The picture that emerged once S&P did that was sobering, to say the least. Over the last 15 years, 92.2% of large-cap funds lagged a simple S&P 500 index fund. The percentages of mid-cap and small-cap funds lagging their benchmarks were even higher: 95.4% and 93.2%, respectively.
In other words, the odds you’ll do better than an index fund are close to 1 out of 20 when picking an actively-managed domestic equity mutual fund.
In fact, the picture was uniformly dismal across all categories of funds. As you can see from the accompanying chart, in the category in which active managers performed the best — global equity — it was nevertheless the case that 83.05% did worse than their benchmarks.
In my experience, most people know the odds of success are bad, but not quite this awful. When I first got into the performance monitoring business four decades ago, I had told clients the odds were 1 out of 5.
I now realize I was too optimistic.
What had biased prior statistics? Standard & Poors says that the biggest factor is what’s known as “survivorship bias” — which comes into play when poor-performing funds are merged or liquidated and therefore don’t otherwise show up in the performance rankings. This plays a big role in the mutual fund world because the attrition rate among funds is surprisingly high.
For example, according to S&P Global, only 34.11% of large-cap mutual funds that existed 15 years ago are around today. Needless to say, the 65.89% of funds that didn’t survive were mediocre performers when they were merged or liquidated out of existence. So a simple ranking of 15-year returns, which by definition focuses only on the 34.11% of funds that survived, will paint a far too rosy a picture.