Truth #6 of 101: The media loves to promote the wisdom and insights of managers with “hot hands” or the “Midas Touch.” They gleefully put them in advertisements and on magazine covers. These gurus are often featured one or two years later in derogatory articles about how their investing prowess has mysteriously disappeared. They die in the pages of the Wall Street Journal or Money magazine. Yet, investors want to keep thinking that picking “this” manager will be different for them. It’s not!

Mr. John Bogle, former Vanguard CEO said, “All the statistical data suggests that investors are wasting their time trying to pick active managers. Money manager Ted Aronson says that to be even 75 percent sure a manager is skillful, you’d have to track his performance for between 16 and 115 years. Let’s assume that an investor owns five actively managed funds over the portion of their investing lifetime—which might be 65 years for a twenty- year-old today. Yet on average, mutual fund managers last about five years. That means that an investor might have 65 managers over their investment lifetime. To truly believe that you’re going to pick 65 managers that will outperform the market defies credulity.”

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