Why buy an active mutual fund?

1 reply [Last post]
PassiveInvesting's picture
Joined: 2012-08-22

I am curious to see the reasoning behind buying actively managed mutual funds, there is no evidence to support it since no one is able to pick the winners in advance and Morningstar's 1 star rated funds have outperformed 5 star funds more often than not. 

Daniel Felton's picture
Joined: 2015-10-01

The father of value investing, Benjamin Graham once wrote that making money on investing should depend “on the amount of intelligent effort the investor is willing and able to bring to bear on his task” of security analysis. He defined the intelligent investor as an enterprising individual that has the time and energy to do his or her own investment research. In contrast to the intelligent investor is the defensive investor who would prefer to have another individual pick stocks, bonds and other financial assets on his or her behalf. Hiring a financial advisor is certainly one alternative, but most retail investors (and also many institutions) prefer to hire a manager through the purchase of a mutual fund. Below is an overview of when it might be a good time to invest through the purchase of mutual funds.

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