Picking a Mutual Fund Manager? Look for Low Fees

SMITH BRAIN TRUST -- Finding a stock picker who can beat the market can be daunting, as many mutual funds that outperform over a short period struggle to repeat the feat in the long run. Russ Wermers, professor of finance and director of the Center for Financial Policy at the University of Maryland’s Robert H. Smith School of Business, tells the Wall Street Journal’s Weekend Investor that figuring out which manager got lucky and which manager has skill is tough. “It’s incredibly difficult to judge the quality of a fund ahead of time,” Wermers said.  As a result, lower costs generally put investors in a stronger position to log higher total returns, which include price changes and dividends. That rule of thumb, according to WSJ's Liam Plevin, has "helped drive the rise of passive funds, which are designed to track indexes and generally charge lower fees than funds that try to beat a stock-market benchmark. Since the returns of funds that follow the same index should be similar, price is a major consideration." Read Plevin's full article, “How to Pick a Stock Picker,” here.