Bad News for Stock Pickers

Jahnke, William
March 2000
Journal of Financial Planning;Mar2000, Vol. 13 Issue 3, p40
Academic Journal
This article focuses on the stock picking practice engaged by individual investors and financial advisors either directly and indirectly through the use of actively managed mutual funds. The failure of actively managed mutual funds to produce superior returns to index funds on average funds is well documented while the success of investors if less documented. Many financial advisors prefer not to select stocks, instead relying on their skills to find good mutual fund managers. The problem with adding value by successfully picking active mutual fund managers is formidable. Not only does stock picking reduce expected returns; on average, it introduces additional risk that can be diversified away using index funds and exchange traded funds. This additional risk can produce a significant reduction in returns over the investor's investment horizon. Financial advisors should focus on finding low-cost ways to invest in asset classes. This can include index funds, exchange traded funds or passively tax-managed, broadly diversified portfolios of individual stocks.


Related Articles

  • HANDING OVER CONTROL. Bolin, Lynn // Finance Week;5/31/2004 Supplement - Richer Life, p12 

    Reports that an increasing number of investors in South Africa have begun turning to private client portfolio managers for their particular brand of customer service. Comparison between personalized investment management services and unit trusts; Team of investment professionals who will build a...

  • Master mind. Julian Gibbs // Money Marketing;6/14/2007, p57 

    The author reflects on the marketing strategy of the Unicorn in Great Britain. He states that master trust fund gives the advisers to go straight to the fund managers which is a direct and easier way of negotiation. Peter Walls, manager of the Unicorn trust fund, exhibits a good performance in...

  • Flexible Funds Attract Jittery Investors. Britton, Diana // Registered Rep;May2011, Vol. 35 Issue 5, p19 

    The article reports that financial advisors and investors have turned to mutual funds as the latter have more flexible directives that would protect their portfolios worldwide. According to research firm Lipper Inc., more investors and advisors have gone into global flexible funds during the...

  • INVESTMENT ADVISOR DIVES HEADFIRST INTO HIS BUSINESS, SPORT. Salley, Hope // Westchester County Business Journal;11/8/2004, Vol. 43 Issue 45, p46 

    The article informs that Greg Werlinich owns an investment company in Valhalla, where he has an elaborate workday helping people manage their finances. Only one year before his return to swimming, Werlinich began his own investment advisory business, Werlinich Asset Management. He studied...

  • Federated Launches Three Value Funds.  // Money Management Executive;3/23/2009, Vol. 17 Issue 12, p5 

    The article reports on the three value funds launched by Federated Investors under the Clover Value fund family name. The three value funds included the Federated Clover Value Fund, Federated Clover Mid Value Fund and Federated Clover Small Value Fund. The advisor of the funds is Federated...

  • Do-It-Yourself Investing. Keeble III, John B. // Financial Planning;Feb2001, Vol. 31 Issue 2, p123 

    Focuses on independent investors. Why some investors do not like sales charges on mutual funds; Details on investment experiences; Explanations on making financial decisions; Comparison between a portfolio manager and a financial planner.

  • Predicting Mutual Funds' Performance.  // Practical Accountant;Jan2009, Vol. 42 Issue 1, p15 

    The article reports on the online tool unveiled by MUTUALdecision, an online company that provides mutual fund information, in the U.S. The company announces that the online tool is made available for financial advisors and investors. In addition, the website focuses on providing information...

  • Advisers hit back at 'bone idle middlemen' media attack. Morris, Pamela // Fundweb;8/7/2013, p3 

    The article reports on financial advisors in Great Britain using multi-manager funds drawing strong criticism. The advisors, however, don't agree to the criticism and say fund of funds can be cheap and beneficial for the client. Advisors are said to lack the desire to select individual products...

  • Will the FSA change its mind? Industry puts forward FSCS proposals. Holt, Natalie // Mortgage Strategy (Online Edition);11/2/2012, p5 

    The article reports on the proposals for Financial Services Compensation Scheme (FSCS) funding models as part of an effort to achieve a fairer way of levying regulated firms in Great Britain. It mentions a proposal that would increase the annual limit of claims paid by investment advisers. It...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics