I was really happy to see this article in the Wall Street Journal. I think it is much more efficient and profitable for investors to forego managed mutual funds and invest in index funds.
I think that most people should only have 20-40% of their portfolio in funds and the balance should be in high quality growth stocks like those on my Watch List and that I describe in my book, The Confident Investor.
Below are the first few paragraphs of the WSJ article. I encourage you to jump over and read the entire article by Kirsten Grind.
Investors are jumping out of mutual funds managed by professional stock pickers and shifting massive amounts of money into lower-cost funds that echo the broader market.
Through November, investors pulled $119.3 billion from so-called actively managed U.S. stock funds in 2012, the biggest yearly outflow since 2008, according to the latest data from research firm Morningstar Inc.
At the same time, they poured $30.4 billion into U.S. stock exchange-traded funds. When combined with bond ETFs, total inflows to such funds were $154 billion, the largest since 2008.
The move shows growing investor distaste for volatility, as the dot-com crash in the early 2000s, the financial crisis in 2008 and recent botched episodes such as last May's Facebook Inc. initial public offering have shaken investor confidence.
It also reflects the fact that many money managers of stock funds, which charge fees but also dangle the prospect of higher returns, have underperformed the benchmark stock indexes. As a result, more investors are choosing simply to invest in funds tracking the indexes, which carry lower fees and are perceived as having less risk.