subject: Why fund managers will always lose and why they will not tell you about this [print this page] It is not known by most people and fund, hedge and bank managers make it even harder are and will make it even harder to find this info that I am about to give you: fund managers will never beat the stock market (nor will any human person but that is a slight different subject that if you are interested, I recommend reading "Reminiscences of a stock operator" that tells the story of Jesse Livermore, one of the greatest trader ever).
Have you ever wondered why a fund manager that has an index as a guide to its investments and direct comparison does not buy directly an ETF from the index instead of trying to replicate its movements by choosing a lot of different securities? Because then, people wouldn't need them would they? They could just go out in the market and buy these ETFs by themselves! But that is not all; there is another factor that I would like to point out so you will begin to understand why a fund manager will never beat the stock market. Note, he can perform better one year or another, but he won't be able to sustain that.
Fund managers are paid to beat some stock index previously defined. So, if there is a big crisis and the index drops 50% BUT your fund manager is able to keep your fund at a loss of only, and only, 45% then, he gets his yearly bonus! Sounds crazy doesn't it? But that is what happens behind the curtains and it will continue to happen as long as people do not try to figure out what is going on. Now, I ask you, how happy would be knowing that your fund manager got his HUGE yearly bonus for beating the market by 5% if at the end of it, your net result was -45%? I wouldn't and neither should you.
That is just the tip of the iceberg; there is a lot more going on under the rug that you might think. So, what I suggest is that you start taking action and start to take your financial status and future in your own hands. You might get it wrong for the first time, but you are on a better road than just leaving your money for fund managers that you don't trust. If it is to lose money like that, then go to Las Vegas. At least the drinking and the girls are included.
Note: I do believe that there are fund managers that are good and they deserve their bonuses. I'm just trying to make a point here that this is not always the case and their job is not as easy and "honest" (for the lack of a better suited word) as it might seem.
Why fund managers will always lose and why they will not tell you about this
