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An active fund at 1% or less per year doesn't make sense. Most mutual funds essentially act like ETFs as a lot of them are focused on relative performance and n
by usertaken 11y ago
An active fund at 1% or less per year doesn't make sense. Most mutual funds essentially act like ETFs as a lot of them are focused on relative performance and not absolute performance. You should read the beginning chapters of Margin of Safety (if you can find the book) as it really helps to explain the mindset of a MF. To reduce expenses for active funds further will only exacerbate this.
If you want to outperform the market, however, you need to find a GREAT hedge fund that charges 1% management fee (at most) and an incentive fee...otherwise it doesn't make sense to pay a flat fee to a MF and get just average performance. (There are exceptions as some MFs do consistently outperform the market but these are few and FAR between).
- nickles 11y ago> If you want to outperform the market, however, you need to find a GREAT hedge fund that charges 1% management fee (at most) and an incentive fee...otherwise it doesn't make sense to pay a flat fee to a MF and get just average performance. (There are exceptions as some MFs do consistently outperform the market but these are few and FAR between). You'll have difficulty finding even a good hedge fund at 1% management fee. Most charge what's known as Two and Twenty -- 2% of assets under management and 20% of profits. Point72 charges as high as 3% and 50%.
- usertaken 11y agoI work in the industry. You are right on a general basis but there are plenty of funds that don't get a lot of press and kill it year in and year out AND charge less than 2 and 20. Most hedge funds are, at best, average because they don't know what they're doing. Don't blindly give 2 and 20 to an avg. hedge fund. Do the math and giving even 2 and 20 to a superstar will allow you to compound at a much faster rate than the S&P500.