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  • The Market Beaters

    Hello, everybody. Welcome to another episode of EricksonTV.

    We have talked about the difference between an index fund and actively manage funds before on EricksonTV.  An actively manage fund has a manager that is picking stocks with the intent of trying to beat some benchmark or index. They are trying to outperform the market averages. Erickson Wealth & Tax Management do not believe in active funds or active management. We believe in the Index and structured index funds.

    On January 9, Barron’s published an article titled, Market Beaters. They asked Morningstar, who rates and rank statistics for different funds, to find U.S active stock funds with a long-term record of beating the S&P 500 index. They also wanted to ensure that the same manager was still running the fund.

    Morningstar gave Barron’s a list of 9 funds. Each fund had a better 1, 3,5, 10 and 25-year return than the S&P 500. All with the same manager.

    Three months after receiving their list of nine winning funds, five of the funds fell from grace before publication even came out. Barron’s questioned whether to continue with their story, but decided to write about the four remaining mutual funds.

    Readers who bought these funds based on that story written by Barron’s may have felt duped because during 2016 those funds basically broke even while the S&P 500 index was up quite a bit in 2016.

    This is one of many examples where just because there is a track record of great performance doesn’t mean it’s going to continue. Another thing to keep in mind is that active funds are even worse if you have them is a taxable account and not in a retirement account. Taxed accounts typically create more short-term capital gains because they are constantly buying and selling stocks guaranteeing you a worse tax performance.

    Curtis Erickson

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    Curtis Erickson | 02/24/2017



    Erickson Wealth and Tax Management, CPA
    W. Curtis Erickson Jr, PS Inc.
    Registered Investment Advisor

    200 1st Avenue West Suite 401, Seattle, WA 98119
    T: (206)284-9900 F: (206)289-5900 E: curt@curtcpa.com
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    Registered Investment Advisor 2021



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