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Why do investors keep buying actively managed funds?

An overwhelming body of evidence shows that actively managed mutual funds underperform their appropriate risk-adjusted benchmarks. In addition, little to no evidence points to persistence of performance beyond the randomly expected, which means past performance isn’t prologue.

That’s the reason for one of the great puzzles in finance: Why do investors continue with such great persistence to buy actively managed funds that underperform their benchmarks?

Read the rest of the article on CBS MoneyWatch.

 

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