This month we have a guest blog post from Bloomberg, “The Math Behind Futility.” The article examines research that looks at the question of why active managers underperform the benchmark so frequently.
If the fund you hold does not capture the entire asset class being targeted, missing just a few of that asset classes’ biggest winners may result in returns below the benchmark index. This is why we recommend diversifying broadly across an asset class. It eliminates the risk of missing the top performers. Active stock funds have fewer holdings and as a result they are more likely to miss the biggest winners.
| Index Performance | April | YTD | Trl 1 Yr |
| US Stock (Russell 3000) | 1.06% | 6.86% | 18.58% |
| Foreign Stock (FTSE AW ex US) | 2.20% | 10.30% | 13.31% |
| Total US Bond Mkt. (BarCap Aggregate) | 0.77% | 1.59% | 0.83% |
| Short US Gov. Bonds (BarCap Gov 1-5 Yr) | 0.32% | 0.72% | 0.20% |
| Municipal Bonds (BarCap 1-10yr Muni) | 0.64% | 2.21% | 0.34% |
| Cash (ML 3Month T-Bill) | 0.07% | 0.17% | 0.40% |
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Raffa Wealth Management is an independent investment advisor providing nonprofit organizations, high net-worth investors, and qualified retirement plans with a full range of investment consulting services. We were established to fill the need for transparency, clarity, and vision in the professional management of investment assets. Visit us at www.raffawealth.com
There is no guarantee that any investment strategy, including those described here, will be successful. Any investment or investment strategy can lose money. Past performance does not guarantee or predict future results. You should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Raffa Wealth Management, LLC. This information was gathered from reliable sources but we cannot guarantee accuracy. Indexes do not reflect the fees associated with actual investments and such fees would reduce the performance illustrated.