Learn From 2011

2011 was not a great year for investors.  The S&P 500 ended up flat.  If you held some dividend stocks, you made a few percent which is ok.

For those that invested in mutual funds that focus on smaller cap stocks (Russell 2000 index), here is some news;
  • JUST 3% beat the index by 2.5%
  • 70% lagged the index by 2.5%, WOW!
  • 27% fell somewhere in the middle
That is incredible and very telling.  If you are willing to risk your money with the odds stacked against you that badly, then go ahead but I think most would not.

One of the main reasons for terrible performance is that smaller cap stock mutual funds have higher turnover within the portfolio and therefore require more analysts and managers thus a higher fee, usually more than 1%.

Do yourself a favor, by the index and save all the drama and headache.  In addition, if you hiring a stockbroker or financial advisor to pick those funds for you, you can subtract another 1% off the top.  Just sayin'.