MISTAKE 21Do You Fail to Consider the Costs of an Investment Strategy?

Overwhelmingly, mutual funds extract enormous sums frominvestors in exchange for providing a shocking disservice.That is, mutual funds charge their investors big fees andusually fail to deliver returns that beat the market.—David SwensenChief Investment Officer, Yale Endowment Fund

Investment strategies that produce market-beating results are obviously attractive to investors. Attributing great skill to the creators of the strategy, investors frequently adopt that strategy—all too often with disappointing results. One reason, as we have already seen, is that the past is not a good predictor of future performance. Also, investors are prone to attribute skill to what might be ...

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