i agree with conclusion, but math can be improved ...

conclusion definitely is correct for most investors as:

1. in a typical year, 70% of funds underperform sp500 index, yet charges 1% vs. 0.1% for passive ETFs like spy;

2. in a five year period, 90% of funds underperform sp500.

so the outperformance is largely luck, yet fees are real money.

do not underestimate 1%. on average, you only make <10%. so 1% of asset is more than 10% of gains. a huge amount.

 

math could be improved slightly:

1. all passive etfs will always underperform index since index is computed withOUT trading costs. trading commission is ON TOP OF management fees. this is like repair costs passed through by your RE PM. both trading costs and PM fees in funds are already compounded into daily NAV. so you do not feel them.

2. finance 101, you do NOT add numbers occuring at different time together. PM fees are charged each year. so the true sum will be much bigger as a property of your ending or peak account balance. in a present value sense, it is much lower. the discrepency comes from compouding, and inflation execerbates the miscalculation.

3. a simple approach is just do this: 

a. calculate the fraction fees out of TOTAL gains. so if you expect to gain 10% a year, but pay 1% a year, then 1% of total net gain goes to fees.

b. So if you contribute 1M over time, and ended with 6M at retirement. You will gain 5M. 10% of 5M is 500K, which is how much you paid for fees. Note that is a futuer value as a lump sum paid at exit date. 

the fees are a lot. of course there are superior fund managers. I doubt you can find them in retail mutual fund/etf worlds. The real talents are hard to come by and you might not be able to get in no matter how much you want to pay. For example, RenTech's flagship Medallion fund charges 5% management fee, AND 44% performance fee. Yet the performance more than justifies the fee. As a matter of fact, the fund is closed for outside investors, and only open to owners/employees of the fund.

So in conclusion, managers of most actively managed funds or most Financial Advisors, are not worth their dime. You are far better off coming to TZLC to learn or just choose low costs broad asset class ETFs to save costs. 

just my 2c

所有跟帖： 

• 谢谢你的细致分析 -BayFamily- ♂ (89 bytes) () 09/08/2015 postreply 08:45:41

• 确实如此很多回报率高的基金已经对外关闭。高回报高费用其实也很合服逻辑。原则上 -firefly2000- ♀ (164 bytes) () 09/08/2015 postreply 09:20:05

• 其实PM的管理费和基金管理费实质上并不是一回事尽管都属于帮人管理财产收的管理费。基金的管理费 -乒乓板- ♀ (2652 bytes) () 09/08/2015 postreply 14:31:16

• 这个补充说明很完整，非常感谢 -BayFamily- ♂ (0 bytes) () 09/08/2015 postreply 15:13:11