Managed Funds

[cidley69]

Another investment question....

While learning about investing, I keep reading about managed funds that average 20% + growth per year (like that quoted below). If this is true, I'd like to put some money in one and let someone else manage it for that kind of growth.

"Peter Lynch managed the Fidelity Magellan Fund from 1977 to 1990, during which time the fund's assets grew from $20 million to $14 billion. More importantly, Lynch reportedly beat the S&P 500 Index benchmark in 11 of those 13 years, achieving an annual average return of 29%." from Investopedia

What's the catch? If there is none, how do I get my money into one of these and make over 20% without doing all the research work mylself?

[davidI]

The catch is that lots of managed funds underperform. It's tough to choose a winner!

Warren Buffet's Berkshire Hataway has a winning record (a little different than a hedge fund but same idea) and is a winner if you can afford it.

Managed funds also usually have fees, no matter whether they make you money or not.

There are various forms of 'managed funds', the most common of which are mutual funds and hedge funds. You can also look into ETFs which are usually not managed, but can be chosen to match the performance of indexes or sectors.

[msommers]

I wouldn't mind finding a stock broker who works off of commission instead of flat fees - some motivation to actually do well!

[ExtraSlow]

DavidI pretty much laid it out.
the catches are:
1) Fees - 2-4% annually, regarless of performance.
1a) Fees when you buy or sell (sometimes huge)
2) Hard to pick a winner
2a) past performance does not mean future results, some people just get lucky and never will again.
2b) on average, once fees are factored in, MOST activeley managed funds UNDERperform the markets.