Assets under Management, 1.4 Trillion Dollars no wonder the aggregate returns are only average. Incentives are to accumulate investor funds, not to earn investors money.I am dumbfounded as to why people continue to fund institutions that provide significantly less than an index return. It is just crazy to me that (for example) American Funds with 1.4 Trillion Dollars under management, boast to investors an (aggregate) compounded annual return over the last 5 and 10 year periods of 10% and 6.9% respectively. Although only very average, is unfortunately very much overstated. After consideration of fees and expenses, these 5 & 10 year returns would be reduced to 8.14% and 5.5% respectively and that is before income (capital gains) tax. Furthermore they may claim a 12% return to investors since inception (56 years) which after fees and expenses turns out to be 8.76% versus a return for the for the S&P 500 of 11.1%. -Makes no sense to me-
2 comments:
Capital gains would be removed from any investment, so it's kind of silly to mention it.
Also: comparing a weighted average of a bunch of funds with different purposes is a bit disingenuous, isn't it? Bond funds have much more stable returns than the S&P 500. I don't know much about the Washington Mutual fund, but I assume it's a more valid comparison. It really makes your post look like a bunch of hyperbole that you run with the lower numbers in your article. What are you trying to establish? That buying an index fund is better than a mutual fund? That's what the people at the Motley Fool have been saying for years, it's nothing new.
In response to Mr. Anonymous:
Not quite sure what you mean by, "Capital gains would be removed from any investment."
If you mean that everyone is charged such a tax, then sure I agree? But this is certainly not the way that people think about returns and is especially not the way multi-hundred billion dollar funds market themselves to unsuspecting 401K-ers.
I agree that the bond funds should be left out of the averages, I did this one rather carelessly to prove a point. However feel free to look the one for Pioneer. There are no bond funds there. Furthermore I will update the averages for American Funds without the 3-4 bond funds which were included. The difference will not make your concerns meaningful.
I also actually used lower expense rates than would have actually been incurred.
Less the accidental inclusion of the bond funds which certainly brought down the average, you will find everything provided here to be overly conservative.
Finally, in response to, "What are you trying to establish? That buying an index fund is better than a mutual fund? That's what the people at the Motley Fool have been saying for years, it's nothing new."
Actually yes that is exactly what I am trying "to establish" within this particular topic. Consider yourself lucky that such information is so easily obtainable. Please sir, would you explain then why such a huge percentage of people's retirement savings are still managed by such funds that are unable to earn what anyone would consider average?
If you want to take such a comment a bit further-in accordance with such logic-one might then ask, "What has Warren Buffett contributed to investment knowledge since he applies concepts that have been around for ages.
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