Active managers finally had a good quarter.  

As you can see from the chart on the right, it was kind of a pathetic quarter with Actively Managed Funds (who research U.S. stocks before they buy or sell, as opposed to ETFs or other passive funds) outperforming by about 1%, but it’s the first time stock pickers beat the benchmarks since 2013, so you’re going to hear a lot of crowing about it this week.  

And active managers can afford to crow, because they charge you massive fees for that 1% outperformance (once every few years and following last year’s 7% underperformance), so they’ve got lots of money for PR and advertising and that’s why, this week, you’ll be hearing the words “Active Management” mentioned over and over again in the MSM, who are very happy to tout the benefits of anything that pays them money.  

I’m not against Active Management per se – we teach our PSW Members to be active managers of their own portfolios. I’m not fan of ETFs either as you end up buying the bad with the good – I’m simply pointing out that this small, 1% outperformance in one Q of one year should not be used to convince you that Active Managers have a clue. NO ONE has a clue as to where to invest your money that’s better than your own ideas (assuming you are educated enough to be reading and understanding this in the first place).  

The TREMENDOUS advantage you have when you learn to invest your own money is that you’re not charging yourself fees. It’s not the performance of active management that kills you – IT’S THE FEES. Even at “just” 1%, over 50 years of investing your active manager is taking 50% of your total account! Unless his long-term outperformance is better than 1% per year, YOU WILL LOSE MONEY WITH ACTIVE MANAGERS.  

YOU are the best person to invest your own money and our goal at PSW is to teach you that it’s not hard to do that. At the base level, you should start by investing in things you know well. When I was 7 years old (1970), my Grandfather told me the same thing and asked me what stock I wanted to invest in and I said “Cadbury” because I loved the chocolates (he lived in England). He bought some for me and that became my first stock.