Even though you’d think they’d know better, fund managers also fall prey to financial hype. You can see this in the trading patterns of funds themselves. Mutual funds “turn over” stocks frequently, meaning they buy and sell stocks a lot (incurring trading fees and, if held outside a tax-advantaged account, taxes for you). The managers chase the latest hot stock, confident of their abilities to spot something that millions of others have not. What’s more, they also demand extraordinary compensation. And despite that, fund managers across the board still fail to beat the market 75% of the time.
