Page 24 - ARUBA TODAY

Monday 13 February 2017 BUSINESS
A24

Of Mutual Interest:

After years of faltering, stock pickers see signs of hope

STAN CHOE That head start means ac- raise interest rates, analysts
AP Business Writer tively managed funds need expect stocks to move
NEW YORK (AP) — They’re to perform better than the more independentl
some of the most-shunned index just to match its per- y. The Fed raised rates in
people in investing, and if formance. December for just the sec-
there were ever a time for And only a select few have ond time in a decade, and
them to make a last stand, done so recently. more increases are expect-
it’s now. Just 15 percent of actively ed in 2017.
After watching hundreds managed large-cap stock Instead of focusing on the
of billions of dollars head funds beat the S&P 500 effects of the Fed’s stimu-
out the door, stock-picking over the 10 years through lus, markets will pay more
managers of mutual funds June 2016, according to attention to how individual
say conditions are starting S&P Dow Jones Indices. companies are performing,
to turn in their favor, and The last year the major- the thinking goes.
they’re in the best position ity of actively managed Average stock correlations
in years to finally beat in- large-cap stock funds beat are now close to their low-
dex funds. Stock traders follow prices, Thursday, Feb. 9, 2017, at the New the S&P 500 was 2007. est level in years, accord-
A lot is riding on whether York Stock Exchange. (AP Photo/Mark Lennihan) The difference in perfor- ing to Goldman Sachs
they do. Predictions for mance means investors strategists.
the death of stock picking stock pickers wouldn’t be than ones run by stock favored index funds by a That has stock pickers op-
aren’t slowing, and they’re enough to reverse the tide pickers, and they have record margin last year, timistic that they’ll be able
coming closer to truth with underway from actively lower fees. For the average according to Morningstar. to separate out winners
each dollar saying good- managed funds into their actively managed fund, They pumped nearly $505 from losers, and that they’ll
bye to the industry. index-fund rivals. $84 of every $10,000 in- billion into index funds, once again get rewarded
“The revenge of active It would likely just slow the vested went to cover costs while withdrawing $340 for it.
management” is one of movement. in 2015, according to the billion from their actively — A more volatile market.
the themes that strategists The migration has been Investment Company In- managed rivals. President Donald Trump
at Jefferies see for 2017, happening for years for stitute. Index funds charge Active managers see came into office promis-
for example. Even so, they simple reasons: Index funds less because they merely cause for optimism. Among ing to shake things up,
say that a good year for have performed better try to track the S&P 500 and the reasons they say the and market watchers ex-
other indexes, rather than table is no longer tilted so pect that to result in bigger
beat them. much against them: swings for stocks.
Average expenses for — A more diverse market. Big changes in policy may
stock index funds were $11 For years, stocks often be coming, from how
of every $10,000 invested. moved in unison. During much businesses pay in
the financial crisis, nearly taxes to how connected
everything crashed on the U.S. economy remains
the threat that the global with the rest of the world’s,
economy may collapse. In and the heightened uncer-
ensuing years, stocks rose tainty could make things
en masse after stimulus bumpy.
from central banks around While that can be a scary
the world helped to pro- thing for investors focusing
vide a rising tide. on their 401(k) accounts,
It’s a concept called corre- stock-picking fund manag-
lation, and when it’s high, ers often welcome higher
stocks are moving together volatility.
in herds, and stock pick- When a stock they like and
ers have less of a chance have been following for a
to differentiate themselves while drops in price, they
from the index. say it gives them the op-
There’s less of a reward for portunity to buy low.
avoiding losers or identify- Regardless of whether stock
ing winners if everything’s pickers find 2017 more wel-
behaving the same way. coming for their style than
Now that that the Fed- earlier years, many experts
eral Reserve has ended its say the first focus for fund
bond-buying stimulus pro- investors should remain on
gram and begun to slowly keeping costs low.q