Jason Zweig

speaker

906 appearances 17 recordings 1 series first heard Jan 2018 last heard Sep 2022

Jason Zweig’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · Mutual Funds Offer New Investors Convenience, With a Cost · 28 Apr 2021 podcast

First of all, you might not have a choice. voice-verified

You might be investing through a 401k or other retirement plan that voice-verified

gives you only mutual funds as the option. voice-verified

Second, if you're investing over a time horizon longer than this afternoon or today, it might not matter to you what the momentary fluctuations in price are. voice-verified

I mean, certainly, if you were to look back 10 years ago from today, you would have no idea what a particular fund traded at on some particular morning or afternoon. voice-verified

or how much of a difference there was over the course of a few minutes trading. voice-verified

And for long-term investors, those short-term fluctuations tend not to matter over time. voice-verified

Well, so an active fund, which is typically run by a stock picker, a portfolio manager, or a team of managers, offers you something that can be quite valuable. voice-verified

It offers you hope. voice-verified

It offers you the potential to do better than average. voice-verified

In other cases, it could offer you the possibility of sidestepping a very bad period in the market, like, for example, what we saw in early 2000 when stocks lost a third of their value in a few weeks. voice-verified

There are active managers who claim to be able to avoid those kinds of losses. voice-verified

Now, I would immediately add that the historical evidence that managers can either beat the market on the upside or avoid the worst of the losses on the downside is not very persuasive. voice-verified

On average, about three quarters of the funds that have either of those as their objective fail to achieve it. voice-verified

Passive, on the other hand, basically an index fund that buys all the securities in a particular market average, offers predictability. voice-verified

When stocks are up 10%, you know you're going to get about 10%. voice-verified

If they're up 50%, you'll get about 50%. voice-verified

If they go down 30% or 50%, you'll get that too. voice-verified

You never have to worry that you will severely underperform the market average that the index fund is investing in for you. voice-verified

The flip side is, just as you don't have to worry about underperforming, you surrender all possibility of outperforming. voice-verified

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