Mutual Funds Trailing Stock Market By Most Since 1998

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Picking fund managers based on past performance will invariably result in poor performance. There is no evidence of any correlation between past performance and future results. To reach your long term goals you should own a globally diversified portfolio with low cost funds.

(Bloomberg News) Stock mutual fundsare having their worst year since 1998 relative to their benchmarks, as higher volatility makes it harder to pick stocks, according to JPMorgan Chase & Co.Among 2,806 funds tracked by the brokerage, 47 percent underperformed their benchmarks by more than 2.5 percentage points this year, the most since the 55 percent recorded in 1998. Only 13 percent of the funds beat the market by the same margin. The underperformance accelerated last month, with the proportion of trailing funds almost doubling from July, according to JPMorgan data.U.S. stock price swings widened at the fastest rate since the 1987 crash in the month through Aug. 23 as investors weighed stalling economic growth against the prospect of additional stimulus from the Federal Reserve. The volatility helped drive August options volume to a record 550.1 million contracts on demand for a hedge against equity losses, according to the Chicago-based Options Industry Council.

“The turbulence of markets in August caused a rapid deterioration of active manager performance,” Thomas J. Lee, JPMorgan’s chief U.S. equity strategist, wrote in the report dated Sept. 1.

This is further evidence that trying to find superior performance or managers is futile and will result in disappointing performance. When you consider the additional costs of active management and the under performance this is a waste of time.

Please comment or call to discuss how this affects you and your long term goals.

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