Chuck Jaffe reports at Marketwatch something he read in a fund’s annual statement recently:
If we don’t deliver consistent performance over the long run, I’d recommend you take your money elsewhere. Really.
This statement appeared in the annual report for Wasatch Funds. It’s rare you see such honesty, but the problem is that funds that perform well for a while build up their investors’ expectations. When expectations are high, it gets more unlikely a fund manager will be able to live up to them.
My philosophy has been to avoid managed funds, when the vast majority cannot beat the average market year after year. For the long term, I invest in index funds like the TIAA-Cref Equity Index Fund [TCEIX].
Updated February 6, 2012 and originally published January 16, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.