From John Wieland, research analyst, Palm Beach Research Group: Mutual funds will soon be a thing of the past…
Financial Times reports 83% of U.S. mutual funds have underperformed the benchmark S&P 500 over the past decade.
Take a look…
That’s why investors are shifting en masse to index funds.
In the year ending in May, actively-managed funds (mutual funds) have seen $213 billion in asset outflows. At the same time, passive funds (Index funds) have enjoyed $240 billion in inflows. That’s almost a half-trillion dollar swing into index funds.
One needs to wonder why only 17% of mutual funds beat the market. Or, how much longer can they can last as an industry with such poor performance.
The answer is: not very long. With a zero percent expected growth rate, mutual funds are fading fast into the sunset…
Longtime Daily readers know the first rule to wealth building is never to lose money. One way to achieve that is to quit investing in mutual funds.
But you may be telling yourself: “Get out of mutual funds? I can’t manage my own portfolio. Where do I begin?”
The best way is to begin is by implementing our Palm Beach risk management protocol: The Three-Legged Stool of Safety.
The protocol discusses three common mistakes most investors make… and how to avoid them:
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The first mistake is having too much money invested in only one or two asset classes—most commonly, stocks or bonds.
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The second mistake is putting too much money in only one or two investments within an asset class.
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The third mistake is keeping your money in an investment as values plummet, hoping for a correction.
How do you avoid these mistakes? Intelligent asset allocation. Sound position sizing. Disciplined stop-losses.
Mutual funds are nearing the end of their existence. That’s why it’s more important than ever to take control of your investment future now. (Current Palm Beach Letter subscribers can review PBRG’s risk management protocol right here. Others can learn more about The Palm Beach Letter right here.)