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A couple of comments--
I generally agree with your assessment although chart shape obviously
doesn't answer the real question of rate of return. That said, few fund
managers beat the averages.
And there are many reasons--for example:
-many must be heavily invested, long only, at all times per prospectus.
-most are compensated on comparisons to averages and that would undoubtedly
reduce risk taking vs the averages.
-their customers are mainly retail and they have learned that marketing can
outweigh exceptoinal performance when it comes to drawing aditional
investment.
-many funds own so many issues that they can't help but mirror the averages.
It is scary to think that they all own the same stuff and that same stuff
makes up the lion's share of cap weighted indices such as NDX and SPX. It
sure looks like a house of cards held up by a flood of new money, funneled
thru large funds into a limited # of stocks (GE, MSFT, ORCL, SUNW etc.).
If/when the flow slows, look out below. But with a baby boomer turning 50
every six seconds and ages 45-60 as the primary savings years the flow could
continue for another 10 years.
By the way, I'm mainly in cash.
----- Original Message -----
From: "Phil Lane" <patterntrader@xxxxxxx>
To: <omega-list@xxxxxxxxxx>
Sent: Saturday, September 02, 2000 10:24 AM
Subject: Mutual Funds exposed
> Things are not exactly the way they may seem to be (as usual). The
attached
> chart shows the long term curves of 2 leading mutual funds compared to the
> Nasdaq Composite Index.
>
> Notice how the fund curves are virtually identical to the market! Only the
> scale factors are different. Basically everytime the market tanks so do
the
> funds. So the managers get paid the big bucks for doing something - but
I'm
> not sure what.
>
> Question: Is anyone aware of a no-load growth mutual fund out there where
> they actually sell out on the way up, or near the top, instead of enduring
a
> nasty decline with the overall market? I don't need a fund that sits on
> stocks as they get hammered, I can do that myself!
>
> Best rgds,
> Phil
>
>
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