When you next pop into your local supermarket, take a good long look at the choice of breakfast cereals on offer. If it is anything like my grocery store, there are shelves upon shelves of breakfast goodies on offer.
Each one claims to be, in one way or another, better for our health. More fibre. Less sugar. 100% organic. More crunch. No added salt. Fat free. The claims they make are only limited by the imagination of the marketers.
But guess what. Breakfast cereals are simply a mixture of grains and sugar. What’s more, it is just not mathematically possible that every brand of cereal can be better for our health. It’s like saying that every schoolchild is above average height for the class.
The plethora of cereals in the supermarket is not unlike the wide choice of investment funds on offer in fund supermarkets. It is the pinnacle of marketing genius. They can’t all be better for our wealth.
The arithmetic of averages just doesn’t work like that. But that hasn’t stopped investors from collectively pouring billions into those managed funds.
Perhaps it is because we feel more secure when someone else is looking after our money for us. Maybe it is that some of us are trusting enough to believe the marketing hype surrounding some new-fangled fund that feeds off the latest investing craze….
…. Anyone care to sink their money into some green funds. It’s got “sustainable” and “ESG” in its name, so, therefore, it must be good!
But think about this for a moment. Whatever the hue of the investment, if two thirds of fund managers can’t even beat the market, which is a fact, then it must mean that the vast majority of investors are losing out.
This acceptance of mediocrity will probably continue as long as the fund-management industry continues to exist.
As for me, I stopped buying packaged cereal a long time ago. It doesn’t mean that I have stopped eating the stuff. I simply learnt how to make my own granola…
…. I get to control what I want to put in, and what I choose to leave out. I get to choose what oils I use and the type of sweetener I want to include.
I have not looked back. And just like my stock-market portfolios, managing my own investments has definitely been the healthier option.
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David does not own shares in any of the companies mentioned.