Proving Persistence

Lots of people think that they can beat the market.  But it’s exceedingly hard to do.  Active advisors bear a serious burden when providing reasons why they should be trusted with clients’ assets.

Indeed, former top mutual funds are falling behind their peers in record numbers. Overall, only 42 percent of top quartile U.S. equity funds for the five years ending in September 2006 stayed in the top half of performers over the next five-year period ending in September 2011. Another 44 percent fell to the bottom half of the rankings and the remaining 14 percent went out of business, according to the most recent Persistence Scorecard on mutual fund performance published by Standard and Poor’s.  Only 12 percent of large-cap funds, 3 percent of mid-cap funds, and 20 percent of small-cap funds stayed in the top quartile of performers.

Every advisor who would be different needs to be able to explain why s/he is different.

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