The Underperformance Gap:
- Most investors do substantially worse than the mutual funds they invest in
- Investors sell funds that underperform for 2-3 years
- Investors switch to funds with several years of outperformance
- Sell low/ buy high strategy is sure fire recipe for subpar results
If you can’t tolerate sticking with a manager who isn’t doing well, even if they have a great long term record- then go with a passive index fund. If you are willing to stick with a manager you believe in- stay actively invested.