This news is hardly new, though. So, why are people still falling for mutual funds?
What causes this myth to live on is the choice of investors to trust the Harvard and Wharton MBAs behind these actively managed mutual funds. With funds that track an index, there is not a mind behind the investing but merely mechanics, as it tracks the market’s performance.
The tendency of the investor to prefer Ivy League intellect over market returns is what keeps actively managed mutual funds a myth. Even if these funds were to beat the market, investors still may end up below the market average because of fees associated with these funds.
Mutual funds being the safest and smartest place for your money is a myth that Dan and Chip Heath do not buy, and neither do we.