When you invest your hard-earned money, of course you hope to end up with more than when you started. Better yet, you would prefer to NOT give up returns you could have had by investing optimally.
But what is “optimal” investing? It’s not about pursuing an active investment strategy – i.e., trying to consistently pick winners, dodge losers, and accurately forecast when to be in and out of up and down markets. Nor is it about hiring an active manager who thinks they can do the same. The evidence is clear: The challenges of active investing are more likely to set you back than advance your interests.
For the past several years, Dimensional Fund Advisors has been tracking mutual fund track records in “The Mutual Fund Landscape.” If anything, the terrain keeps getting tougher. This year’s report found that, across 15 years ending December 2017, only half of the stock funds in existence at the beginning were even around at the end, and only 14% were able to survive and outperform their Morningstar benchmarks.
The moral of the story: To run a successful marathon it’s better to pace yourself than chase the wind. Same thing for your wealth. Take the Long View®.