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Fund Spy

The Trouble With Active Share

It's a descriptor, not a predictor.

The following first appeared in the June issue of Morningstar FundInvestor.

Last month, I wrote about the predictive power of fund expense ratios. Using the success ratio (the percentage of funds that survived and outperformed), I showed that your chances of a successful outcome grow dramatically as you move to cheaper funds. Cheap funds are more than thrice as likely to survive and outperform as high-cost funds.