Something to think about for those of you still on the fence about passive vs actively managed funds.
http://www.bloomberg.com/news/2014-12-24/meredith-whitney-s-fund-sued-by-billionaire-platt-s-bluecrest.html
What's a hedge fund have to do with an actively managed mutual fund?
Probably 95%-97% of people shouldn't be in hedge funds to begin with.
If that is not enough to convince you then think about the fees, typical hedge funds charge 2/20 which means 2% of assets plus 20% of gains, granted they have high watermarks where if the fund does great one year then that is used as the new cost basis for gains ( which is why hedge funds close down when they have a string of bad years to reset the high watermark). So if the average fund only gained 2% for the first 11 months of the year then the investors were basically even for the year.
If you are not invested in hedge funds then consider what people are paying financial advisors that charge 1-2% of assets that just put them in actively manged funds that themselves charge .5-2% and that's the optimistic case where the funds don't have front-end load fees which can reach 5%.
You're again comparing hedge funds to mutual funds. They're not the same.
If you have an adviser the fund shares used are Class I. No load fees, reduced management fee. Competitive advisers these days will have their fees down as low as .75%.
** If you're going to bash something, at least get your facts straight first. **
Absolutely, management fees can and will eat up a big chunk of what should have gone into your pocket. At a minimum, no one should ever even consider engaging an investment advisor that is not compensated on a flat-fee basis. True Of course, the best alternative is not to use financial advisors at all. Not at all. That might be the best ideal option, but there's too many people out there that are safer with an adviser. If they REALLY knew what they were doing, they would already BE rich and not have to hold down that investing advisor job at all. Same goes for mutual fund managers. ;)
Why do any of us do what we're good at?
If they're already rich why wouldn't they continue doing what they're apparently good at if they became rich doing it? Fund manager and financial advisers are jobs where they're front loaded, meaning the hardest periods are the first few years, after that it becomes much more steamlined.
** Yes, in an ideal world we would all manage our own money. However, a lot of people simply do not have that ability. I dream of a Utopia too, but then I remember we're human and it's more likely never going to happen. **