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Rekenthaler Report

Flogging a Live Horse

This time, it's Rekenthaler's turn to wield the whip.


Yesterday, The Wall Street Journal printed six responses to Burton Malkiel's article, "Are You Paying Too Much for Your Investment Advice?" The letters stated that: "essentially all actively managed stock mutual funds, over the long term" trail index funds; Warren Buffett and George Soros don't come for free; active management is needed to create accurate stock prices; that managed funds can be good; that low-cost advice leads to failed expectations (hmmm); and that when the S&P 500 loses a lot of money, so do S&P index funds (hmmm again).

Missing from the letters was my argument: that Malkiel's point is moot because fund investors do not pay too much for investment advice. I'm going to beat that horse for a second time. Despite overwhelming evidence that fund investors are buying low-cost funds, and that fund investors are not squandering their collective monies on expensive purchases, this horse is very much alive. And still kicking.

John Rekenthaler does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.