Three Reasons Why Mutual Funds Fail to Outperform Index Funds

I'm Tyler, a former financial advisor and portfolio manager, and now I make financial content for free so that you don't have to pay for it.

1. Celebrities of the Financial World

Number one, CNBC holds up active fund managers as if they were celebrities. They might have beaten the market on a given year. You know who else beat the market on a given year? My cousin Alfred, who picked 10 stocks last year based on which company logos he liked the most.

2. The Marketing Machine

Number two, the companies that own and operate these funds have billions of dollars. They will make sure they market their winning funds so you will see them. What they won't market is the 60 to 70% of their funds that did not beat the market and actually were forced to shut down because of too few assets under management. So any fund you're looking at is guilty of survivorship bias.

3. Cherry-Picked Time Frames

Number three, what these companies also conveniently never tell you is they can pick whatever time frame they want over which to compare their results to the market results. So again, cousin Alfred could beat the market on any given day. And I could say, Alfred just beat the market. Give us billions of dollars. And those statements and all statements like them are meaningless.

Conclusion

Stick to low-cost index funds, pay 1/30th of the fees, and you will most likely outperform usual funds on a consistent basis. If any of this is helpful, like and follow and I'll keep trying to get you one step closer to where you need to be.

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