Why do investors fail to realize that money placed in a mutual fund that tries to pick "out-performing stocks" is unlikely to yield a better return than money invested in the S&P 500? If fund managers and investment advisers are so good at picking stocks, why are they risking your money rather than their own? Some
Investors often overlook the fact that mutual funds focused on selecting high-performing stocks typically do not outperform simple investments like the S&P 500. This skepticism arises from a fundamental question: if fund managers possess the skills to identify winning stocks, why do they use investors' money instead of personally investing? The underlying implication is that relying on professional stock selection involves significant risk without guaranteed returns.
In his book "The Roaring Nineties," Joseph E. Stiglitz highlights this irony, emphasizing that despite the promising sales pitches of mutual funds, historical performance does not consistently support the idea that picking stocks leads to better outcomes than broader market investments. This raises concerns about the motivations of fund managers and the effectiveness of their strategies, suggesting that a more straightforward investment approach may often be wiser.
