While the conventional wisdom suggests a “don’t just sit there, do something” approach to investing, nothing could be further from the truth. New data from USA TODAY and online portfolio tracker SigFig show investors who actively trade their portfolios do far worse than those with a buy-and-hold approach. The takeaway? Don’t just do something, sit there.
Contrary to one market pundit’s prediction that 2011 would be an “easy year for stock pickers,” last year turned out to be pretty tough for active managers. Fully 84% of U.S. stock funds failed to keep pace with their index benchmarks. After factoring in taxes, however, results were even worse.
High quality international government bonds have historically provided similar levels of returns to those of U.S. Treasury bonds. Importantly, their safety shines when investors need it most—during times of extreme stock market distress. Unfortunately, no suitable mutual fund existed to allow investors low cost and diversified exposure to this important asset class. Until now.
With the this year’s batch of “Where to Invest” market guides now hitting stores, a review of the leading financial publications’ 2011 predictions might serve as a necessary warning for investors bent on following that advice.