CANT I BUY AND HOLD A DIVERSIFIED PORTFOLIO OF ACTIVELY MANAGED FUNDS AND GET BETTER RESULTS?
You can certainly buy and hold a diversified portfolio of actively managed funds, but that probably won’t help you beat the market, and is likely a recipe for lagging it. The reason is that in any given year, roughly 75% of all actively managed funds underperform the market. Those numbers get even worse over longer time periods. Selecting individual funds that will beat the market over time is incredibly difficult. Rather than attempt that low-probability game, many people prefer to take the market’s returns via index funds, rather than suffer a below-market return, which is what most actively managed funds produce. If you want to try to beat the market, you need to look into a more active strategy than simply buying funds and holding them for a long period of time. SMI’s Enhanced Just-the-Basics and Upgrading strategies are two approaches that offer promising odds of coming out ahead of the market, but they require more time and attention than does JtB.
