Morningstar recently released the latest edition of their Mind the Gap research. Once again, “allocation” funds (e.g., balanced funds, target-date funds, LifeStrategy funds) had the smallest gap (i.e., best investor returns relative to reported performance figures). Investors tend to just buy them and leave them alone, which is generally the best strategy. And again “sector” funds had the highest gap — which is also not surprising because, if we’re being honest, how often is performance chasing not a part of what’s going on when somebody has a industry-specific fund in their portfolio?
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