Why Persist in the Deadbeat Stock Funds?

Physician's Money Digest, November15 2003, Volume 10, Issue 21

The S&P 500 is a vital monitor of the economy'sheartbeat. It measures the cumulativemarket value of roughly 80% of the entireUS stock market. Surprisingly, this index iscomprised of just 500 companies, out of about19,000 or so publicly traded companies.

Kiplinger's

According to the November 2003 issue of, "Over the past 20 years, only 12% of USstock-fund managers beat the S&P 500, whichmeans that the vast majority of stock-fund managersare below average."

This raises 3 questions. Why are so many poorperformers still employed? Why do investors keepgiving these poor performers their money in stockpurchases or holds? And how must a fund managerfeel coming up shy of their benchmark over a longperiod, such as 10 or 20 years?

Consequential question:

All of these are great questions, but question number2 is paramount, and physician-investors should betaking a closer look at it. Why, indeed, do investors keep giving billions of dollarsa year to stock mutual funds when the odds are 7to 1 they'll do worse than the averages?

Bill Staton is chairman of Staton FinancialAdvisors, LLC, a money management firm whoseaccounts were up over 20% in 2002. Join his freeweekly "Dollar-Bill Club" and receive a no-obligationtrial subscription to his weekly "E-MoneyDigest" by e-mailing him. His newest book, coauthoredwith his wife Mary, Worry-Free FamilyFinances (McGraw-Hill Trade; 2003), is currently available in bookstores.He welcomes questions or comments at 704-365-2122, 704-365-1910 (fax), or bill@billstaton.com;. For more information, visitwww.billstaton.com.