{"id":89,"date":"2007-12-12T13:34:19","date_gmt":"2007-12-12T21:34:19","guid":{"rendered":"http:\/\/marketriders\/weblog\/?p=89"},"modified":"2017-03-22T21:30:02","modified_gmt":"2017-03-23T04:30:02","slug":"wall-street-journal-only-25-funds-out-of-1935-beat-the-sp-since-1998","status":"publish","type":"post","link":"https:\/\/www.marketriders.com\/investing\/wall-street-journal-only-25-funds-out-of-1935-beat-the-sp-since-1998\/","title":{"rendered":"Wall Street Journal: Only 25 Funds out of 1,935 Beat The S&P since 1998"},"content":{"rendered":"

Winning
\nFunds Share Traits, But the Trick Is Finding Them<\/span><\/h1>\n

By JACLYNE BADAL<\/span><\/strong>
\nDecember 3, 2007; Page R1<\/span><\/span><\/strong><\/p>\n

\n

\n

Today’s
\narticle in the Wall Street Journal attempts to help mutual fund investors
\ndetermine what characteristics a mutual fund had before<\/span><\/strong><\/em> it began an 8 year streak of beating the S&P.<\/p>\n

\n

\n

“We started by identifying a group of
\nmutual funds with the longest winning streak against a well-known measure —
\neight straight years of beating the Standard & Poor’s 500-stock index. Only
\n30 U.S.
\nstock funds made the cut, out<\/a> of 1,935 eligible funds tracked by Morningstar
\nInc. Then we asked Morningstar to crunch the funds’ data from 1998, as the
\nstreaks were<\/A> set to begin….Along the way, we also noticed …five of the
\nseven focused on natural resources, such as oil, that were beaten down in 1998
\nbut have boomed since. The lesson? Be willing to invest in categories that have
\nbeen out of favor, since they may be due for a resurgence.<\/em><\/p>\n

\n

\n

Kudos
\nfor the Wall Street Journal for helping investors attempt to find the 1.3% of mutual
\nfunds that had this kind of streak! But come on — what a useless bet to
\ntake. Let’s see, I can:<\/p>\n

\n

\n

1.
\nTry To Beat The Market. ip info<\/a> . Take my chances that I can identify the 1.3% of
\nthe funds that will beat the S&P . If I do find one of the funds in
\nthe top 1.3%, I’ll beat the S&P by a few points. But if I fail
\nto identify one of those top 1.3% of the funds, I’ll probably lose 2% a year
\nfor 8 years which will deteriorate my capital by 20% over those 8 years compounded.<\/p>\n

2. Buy an index fund or ETF and match the market with 100% probability
\nwithout paying much tax.<\/p>\n

\n

According
\nto the article:<\/p>\n

“In 1998, the average large-blend fund in Morningstar’s overall
\ndatabase turned over 62% of its stocks each year. Several of the large-blend funds
\non our list came in comfortably under that level. Currently, the average fund
\nin Morningstar’s large-blend database turns over 72% of its shares annually.
\nMost of the seven large-blend funds on our list continue to trade less
\nfrequently than their peers. <\/em><\/p>\n

\n

\n

If
\nwe assume half the normal turnover, the tax bill will eat you alive even if
\nthey do beat the market. Since the study only describes pre-tax returns<\/span> <\/span>I’ll bet another 10 – 15 of those funds don’t
\nbeat the S&P.<\/p>\n

I think the odds of beating a roulette game by spinning the dice 2000 times
\nand picking random numbers from the Keno board are better.<\/p>\n

To the Wall Street Journal: Great article. Wrong
\nconclusion. The right conclusion? <\/span><\/p>\n

Stay away from mutual funds and buy
\nindex funds or ETFs.<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Winning Funds Share Traits, But the Trick Is Finding Them By JACLYNE BADAL December 3, 2007; Page R1 Today’s article in the Wall Street Journal attempts to help mutual fund … Read more →<\/span><\/a><\/p>\n","protected":false},"author":8,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_wp_rev_ctl_limit":""},"categories":[20],"tags":[],"yoast_head":"\nWall Street Journal: Only 25 Funds out of 1,935 Beat The S&P since 1998 | MarketRiders<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.marketriders.com\/investing\/wall-street-journal-only-25-funds-out-of-1935-beat-the-sp-since-1998\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"Wall Street Journal: Only 25 Funds out of 1,935 Beat The S&P since 1998 | MarketRiders\" \/>\n<meta name=\"twitter:description\" content=\"Winning Funds Share Traits, But the Trick Is Finding Them By JACLYNE BADAL December 3, 2007; 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