"For Mutual Funds, Simpler Seems Better"

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
Taylor Larimore
Advisory Board
Posts: 25949
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

"For Mutual Funds, Simpler Seems Better"

Post by Taylor Larimore » Fri Jun 16, 2017 10:00 am

Bogleheads:

John Rekenthaler, Vice President of Research for Morningstar, has written a column about "Simplicity." These are important quotes:
"Because hedge funds are not required to report their returns to a central authority, they self-report. That is, they give their results to databases when and if it suits them. That naturally leads to both creation and survivorship biases, with hedge funds surfacing when the numbers support them, and then disappearing when they do not."

"The general rule of mutual fund pricing is, the fancier the label, the more that investors pay."

"I must issue the usual caveat for mutual fund research that consumes massive amounts of data, and returns summary statistics—the dangers are great!"

"Complex strategies tend to harm rather than help mutual fund performances certainly matches the eye test."

"Mutual fund managers who invest in flavors other than plain-vanilla have some proving to do. The odds do not look to be in their favor."

"The lesson that mutual fund industry leader Vanguard has long taught its shareholders: Keep it simple, and keep it cheap."
For Mutual Funds, Simpler Seems Better

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

dwickenh
Posts: 714
Joined: Sun Jan 04, 2015 9:45 pm
Location: Illinois

Re: "For Mutual Funds, Simpler Seems Better"

Post by dwickenh » Mon Jun 19, 2017 8:41 am

Thanks for linking the article Taylor.

Trying to remember who else is famous for the "simple" approach :D

Best to you,

Dan
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

Post Reply