Funds, That Are Driven By Research, So What?

NCAA Pools & Mutual Funds Driven By Research, So What?

                   by: Brendan Magee

With March Madness upon us once again, I find myself parked in front of the television a lot more which means I am seeing a lot more investment commercials too.

One in particular caught my eye. There was a former college basketball player serving as this mutual fund company's spokesman and he was saying that this company's big selling point was that the company's funds were,  "Driven by research!"

On the surface that sounds pretty good. Who wants to put money into a fund driven by blind pure random luck? Where's the wisdom in that? Unfortunately, that is actually what the investors in this fund are actually doing. 

See what the fund company fails to convey in this commercial is that all the research in the world will not have anything to do with how that fund performs in the future. In Free Market investing, all the knowable and predictable information that exists about the market or individual stocks has already been factored into the market and the prices of the stocks. As information changes and becomes available that new information gets absorbed into the price almost instantaneously. Think about how quickly we get news about events happening around the world these days. It is only unknowable and unpredictable information and events that will move the market or stock prices.

Another way of saying that is that it is what happens tomorrow, next week, next year, the next ten, 20,30 years that is going to determine how a mutual fund is going to perform. Do all the research you want. That information is already factored into the market. Trying to use that information to figure our how the fund will perform in the future is pure speculation and gambling. It's like using the season that just finished up and all the information that goes with it to predict who will win the NCAA Basketball Championship. Think about it, how many of those office pools have you actually won?

Gambling with a few bucks on an office pool might be fun with a few entertainment dollars, but not with the money you are going to need in retirement.

Brendan Magee is the founder and president of Inevitable Wealth Coaching.With questions or comments e-mail brendan@coachgee.com or call 610-446-4322