7 Mistakes Every Investor Makes (And How To Avoid Them) by Joachim Klement;

Author:Joachim Klement;
Language: eng
Format: epub
Publisher: Lightning Source Inc. (Tier 2)
Published: 2020-01-24T10:30:03+00:00

Figure 4.8: Performance of fund managers with experience

Source: Porter and Trifts (2012).

The top quartile managers saw their outperformance decline from 6.8% per year, in the first three years, to 4.6% per year afterwards. It was only a select few managers at the very top of the list that managed to replicate their original success of the first three years. Since it is almost impossible to identify these true investment stars before they become stars, this means that investors, on average, have to face an inconvenient truth: the funds they select, and the managers they invest in, will likely have worse and worse performance the longer they manage their funds.

Consider this the next time a fund management company, or a fund manager, uses the years of experience a manager and his team have to advertise a fund. The implicit claim is that more experience makes them better investors yet, in practice, it likely makes them worse.

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