West Loop Financial LLCHow the mutual fund graveyard can hurt investors – West Loop Financial LLC https://www.westloopfinancial.com Evolutionize Site Wed, 19 Aug 2020 20:50:49 +0000 en-US hourly 1 https://wordpress.org/?v=5.1.22 How the mutual fund graveyard can hurt investors https://www.westloopfinancial.com/2014/05/20/how-the-mutual-fund-graveyard-can-hurt-investors/ https://www.westloopfinancial.com/2014/05/20/how-the-mutual-fund-graveyard-can-hurt-investors/#respond Tue, 20 May 2014 16:07:06 +0000 http://evolvemypractice.com/?p=937 The tendency for mutual fund companies to drop poorly performing funds when calculating historical return data is a major problem for unsuspecting investors, and it’s known as survivorship bias. An investor selecting mutual funds today is choosing from a list that excludes the losers that have been either closed or merged out of existence so...

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]]> The tendency for mutual fund companies to drop poorly performing funds when calculating historical return data is a major problem for unsuspecting investors, and it’s known as survivorship bias. An investor selecting mutual funds today is choosing from a list that excludes the losers that have been either closed or merged out of existence so that their poor returns disappear.

For example, Morningstar reported that of all the traditional U.S. mutual funds operating in 2004, 40 percent had shut down before 2014. Perhaps even more surprising, Morningstar also found that of the funds it rated five-stars in 2002, 20 percent didn’t survive the decade. And an astonishing 61 percent of the one-star funds survived the full 10 years.

Read the rest of the article on CBS News.

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