Common Sense on Mutual Funds

"As long-term investors we cannot afford to let the apocalyptic possibilities frighten us away from the markets."

"The greatest benefit of a balanced investment program is that it makes risk more palatable."

"In investing, rely on the ordinary virtues that intelligent, balanced human beings have relied on for centuries: common sense, thrift, realistic expectations, patience, and perseverance."

"A powerful argument can be made that the choice of equity fund styles, like the choice of fund portfolio managers, is just one more example of industry witchcraft."

"The bogus fund-switching strategy in vogue today, implicitly designed to counter the index strategy by misleading investors into thinking that, individually, they can somehow out-fox the market, is certain to be a loser's game."

"Given the power of mean reversion in the returns of individual mutual funds, an index fund provides the most reliable participation in the future returns of equities as a group."

"A lot of casino capitalism, by managers and investors alike, is being labeled as investing, and betting may be the best word to characterize a strategy of overreliance on the composition of an unmanaged and relatively unchanging market index."

"If equity funds as a group are to outpace the market, the last best hope is through minimization of the fiscal drag that makes winning the game so tough."

"Few portfolio managers spend their time agonizing over the tax consequences of their decisions."

"Small differences in compound interest lead to increasing, and finally staggering, differences in capital accumulation."

"The mutual fund industry is developing a form of casino capitalism, featuring rapid trading in the financial markets and in the mutual fund marketplace, with an excessive portion of the amounts that are wagered going to the croupiers."

"The mutual fund is no longer primarily an investment account under the stewardship of a professional manager, but an investment product under the control of a professional marketer."

"Wisdom, far more than mountains of detailed data, and common sense, far more than opportunism, are ever destined to be the prime ingredients of long-term investment success."

"The easiest and surest way for a fund to achieve the top quartile in investment performance among peer funds is to achieve the bottom quartile in expenses."