Mutual Funds

Can You Beat a Hamster?

The catchy headline of the week had to go to the New York Post’s “Crypto-investing hamster beats performance of Warren Buffett”. The story describes how two German gentlemen have designed an enclosure for the rodent, named Mr. Goxx, that triggers buys and sells based on what tunnel he chooses to take to his hamster wheel.

Since June, Mr. Goxx has logged better returns trading cryptocurrencies than Warren Buffett at Berkshire Hathaway (or even the S&P 500 for that matter) has returned in the same timeframe. Surprising?

Not at all. But investors can learn something from this.

Mutual Fund Landscape

Last week, I took a look at how the growth of index funds has led to more scrutiny of passive investments and their impacts on the market. This week, we’ll look at more evidence of the futility of high cost active management as compiled in DFA’s recently updated annual Mutual Fund Landscape report. The analysis shows that a majority of fund managers evaluated failed to deliver benchmark-beating returns after costs.

Index Fund Attention Abundance

I attended a meeting in the early/mid 2000’s where Abigail Johnson, now the president and chief executive officer at Fidelity Investments, was the featured speaker. She tried to make the case that if everyone bought index mutual funds, that security prices would never change. In other words, she claimed that if index funds become too popular and investors “blindly” bought an index’s underlying holdings, that sufficient price discovery may not happen in the market.

So was Ms. Johnson right? Should the rise of index funds be a cause of concern for investors?

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