Survivor Bias – What Investment Managed Funds Are Hiding

Survivor Bias - managed stock investment fundsI believe that the best investment you can make is saving money and the easiest way to do it is through a simple investment plan. Part of that plan is using index funds to invest in stocks rather than managed funds. It seems a new report further confirms this as it seems that managed funds have a secret in the closet they’ve been hiding called Survivor Bias.

The difference between an actively managed fund and a passive fund (such as an index fund) is that one has a manager that uses his or her knowledge to pick stocks. For this service and knowledge, you pay a fee. Passive funds, on the other hand, simply follow an index and buy the exact same stocks in that index. Since there is nobod


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3 Responses to Survivor Bias – What Investment Managed Funds Are Hiding

  1. Scott says:

    Excellent article. It explains how every fund company can claim to have top performing funds without lying. Just merge the non-performing ones, and “poof”, now every fund is great. Just one more confirmation if you’re not investing in a deferred tax account, as long as you do a little due dilligence, and not try to get greedy, you’re better off fending for yourself.

    It also explains how the little DRIPs I do own have performed much better than my 401(k)s. Its a shame these deferred accounts don’t allow you to buy and sell individual stocks. (I’m talking about going through an employer, not an IRA)

  2. sue says:

    you may want to put more money into a ROTH IRA or traditional IRA so you can buy and sell individual stocks or buy ETF’s.

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