In a recent Dallas Morning News column, financial columnist Scott Burns discussed a financial strategy he refers to as the “Better Monkey Solution”. The concept is simple: your investment strategy need not be complex to be effective.
The “Better Monkey Solution” calls upon investors to be their own portfolio manager utilizing low-cost index funds as their primary investment. Over time, Burns advises the investor to measure the returns on your portfolio and rank them against portfolios of actively managed mutual funds which were invested in the same asset classes.
You don’t have to wait five, ten or even 15 years to get the results of this test. Because two financial researchers, Richard Ferri and Alex Benke, have already done it for you. Care to find out what their research showed? Here’s a hint: casual investors beat the professionals at their own game. And it wasn’t even close.
Here are two incredible facts taken from their specific findings:
Between the years of 1998-2012, a portfolio of three index funds beat over 83% of the portfolios of actively managed funds
The longer the index funds were held by the casual investor, the greater the percentage of managed fund portfolios it beat
If you want to prove to yourself that this study is correct, you can easily begin with GuardVest’s platform. Take the Free Look Portfolio Challenge and see if you don’t come to the same conclusion. We want to make sure that our subscribers are informed investors—with accountable advisors.
Always remember that GuardVest is an unbiased source of information.This company receives no compensation or fees from financial firms and we are not money managers. We’re simply interested in keeping investors apprised of their money management as it relates to the financial professionals managing their portfolios. That’s the sole reason we created the Advisor Report Card. We’ve created the financial advisor oversight necessary to put the power of accountability right at your fingertips.