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Part: 3 Your Choice: If Mutual Funds, Th... > Ask Yourself: Can My Equity Fund Man...

Chapter 16. Ask Yourself: Can My Equity Fund Manager Really Beat Your Equity Fund Manager?

Tell the truth: You bought that mutual fund you are holding because of its perceived performance. Someone recommended it to you, or you read about its strong performance in the popular press. Nothing makes investors happier than the arrival of their mutual fund statement trumpeting the brilliant performance of the fund. You immediately ask yourself how much better off you are this quarter than you were the last.

So much of what investors are exposed to about mutual fund performance is misleading, transitory, or simply useless. For example, in the first few months of 2001 a few mutual funds bought gold-mining stocks just as they gained an average of 25 percent in a short period. The performance of these funds received a positive boost, but this does not mean that one would want to hold gold stocks very often. These stocks experienced a down market for the preceding five years, and over the long run, owning gold and gold-mining stocks has been a very poor investment.


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