Target audience

For those who decide where to put the excess cash or retirement savings.

Summary point to

Analysis

Common on Wall Street, most of the "investment fund managers can not beat the market", by comparing the return of funds on behalf of the benchmark (such as the S & P 500 index measurement). Looking the logic of this argument – seems to have a certain reason.

Before you continue, consider two investment choices to compare this article: (1) actively managed mutual funds are well qualified (and expensive) professionals to make investment decisions, often with specific issues (which is specialized in metal or Asia-Pacific Region stock), because this – the management committee for the inverter is the total assets of two highly skilled investment team who are the basis of% of assets under management. (2) passively managed mutual funds or exchange-traded fund, its mandate is to monitor, the general movement in the market (such as performance, Citigroup S & P 500 Index 2 passively managed fund that is registered% index of operation) from 2% of the United States group. In the absence of a detailed financial analysis – the skeleton of the fund management team, so that a minor has been charged to investors (from 0 to 1, the total assets%).

Why is that investment fund managers can not exceed the market?

(1) The mutual fund is an effective realization of cash flow increased asset base. This seems to be a logical conclusion because the market investment fund posts higher profit, will be the concern of ordinary investors who flooded with excess cash in the hope that the historical recurrence of the fund. More cash is equal to a larger asset base. Assuming that the Fund would also gain extra money, to double the current asset base, so the team will identify investment opportunities, enough to pay double to provide the same performance year after year, the previous year's gains. If money is not invested – and then return will be reduced to half in dollar terms, earnings remain unchanged, but the scale of assets used to generate such profits more than doubled – making mutual fund managers in a difficult position.

(2 and money) to set up once again – what kind of choice, fund managers, you can take the money invested in the existing farms in the year and funds, therefore, to promote the level of these stocks in the 'local staff was considered too expensive, or may be money back to invest in are not considered strong enough investment in the first share. With the previous point – the opportunity is limited to obstacles, so that more money – not the best opportunity for the fund less the final run with the larger increases in the use of the cash investment option to go out to play.

(3) The United States Securities and Exchange Commission% of mutual fund assets of the border, on the population, so more money, more more action should be taken to position. As the funds can only invest so much in each one to determine the population, more worthy of investment should be OK to put the money game. Finally, adequate cash flow – the fund must buy large basket of various actions, essentially following the market and, therefore, become a glorified index fund.

Since the former passively managed funds are expected to be the same, passively managed funds (that is, the market index fund or ETF Fund's actively managed funds, because the lower the excess management fee) rate of return. It is speculated that, in the long run, as the fund each year more than the market will see the funds from investors, which continue to cause the Fund to purchase funds in the results of many different baskets of shares, thereby increasing cash flow and become inadvertently too a high index funds.

Where to go from here?

For those with registered retirement savings plans, 401K savings plan or a decision or if you are thinking of staring at a savings fund – to consider the transfer of funds to the Foundation actively managed and passively managed index fund market with the local company's asset management institution or a financial agencies track or passively managed index funds. Index funds market seems to be the winner.

Thanks

Simon GIANNAKIS

Tags: Asia, ETFs, fund, Funds, index, investment, investment fund managers, Mutual, Simon GIANNAKIS, target audience, United States, Wall Street