Michael Jensen, then an economist at the University of Rochester, used the data to analyze individual fund performance between 1945 and 1964. He found that individual mutual funds were unable, on average, to outperform a strategy that simply bought and held a marketwide portfolio. In fact, there was scant evidence that any individual fund delivered better returns than you’d expect by random chance.
After 100 years of data, the story has stayed the same. Only more so. Stock returns compounded at about 10% per year over the full century.
What does this mean for average investors?
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When it comes to investing for your future, managed funds can be a very smart strategy. The managed fund you’ll be most familiar with is KiwiSaver. Using a managed fund can help you achieve your long-term goals like saving for a house deposit, or towards your retirement. We outline the advantages of managed funds, along with a few finer details that are worth thinking through before you commit.
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