Smartest Guys in the Room – eh, eh, Underperform – Really!


Extensive studies now prove that most of the claimed “smartest people” underperform when it comes to picking stocks and running Mutual Funds and ETF. A recent Wall Street Journal article “The Dying Business of Picking Stocks” clearly provides proof that MOST of the people who claim to be the “experts” can’t even outperform a simple Index, like the S&P 500 index. Most of the big name mutual funds do not outperform the dirt cheap Vanguard 500 Index Fund.



I’ve been watching these people on CNBC and other channels for many years, they use big words and show complex charts telling us to buy this, sell that and yet they underperform! Pension funds, 401K retirement plans and so forth are dropping Hedge funds, Actively Managed funds and general stock pickers. Actively Managed funds use fancy stock picking methods and always charge higher fees to pay all these “stock pickers”, yet they underperform.

Fact: Over the last decade ending June 30th, between 71% and 93% of active US stock mutual funds have either closed or they have underperformed the index they are trying to beat.  San Diego County Employees Retirement Association recently moved 25% of its assets into index funds averaging just .05% fees, vs. the previous 1.1% fees.

How much are you paying in fees for your Mutual or ETF funds?


Analysis of My Accounts:
I did an analysis of all of my holdings for 2016, factoring in dividends for total returns. I compared month by month my accounts performance vs if I had just started the year with all my money in either QQQ (PowerShares Nasdaq top 100 stocks) or SPY (SPDR S&P 500 ETF).

Here is what I found in my accounts.

  • My taxable account, thru September performed slightly better than the QQQ Nasdaq, and slightly less than the SPY S&P 500 Index.
  • My IRA accounts out performed both, only because I invest in high yield, averaging almost 7% dividend yields, and have had nice appreciation this year. However, I view this account as a future “Income” account and I’m not looking for price appreciation, just income. A concept that some people have a hard time understanding.

What should you do?
Follow the rest of the money, examine your Mutual funds, ETF’s and stocks you own. Compare them to the performance of a very inexpensive S&P 500 ETF like Vanguard VOO with .05% fees, or the Vanguard VFINX Mutual fund. Unless you have special stock picking skills or need special dividend needs you might want to have a large portion of your investments in a simple index fund.








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