The Trifecta of Terrible

ValueWalk has a fascinating story posted about the worst mutual fund that ever existed.

The fund was guilty of three things that, when repeated over years or decades, are almost guaranteed to destroy wealth rather than create it. We’ll call it the Trifecta of Terrible:

– Charge high fees

– Trade constantly

– Time the market

The fund in question, originally called Steadman and later rebranded as Ameritor, managed to turn a $10,000 investment in 1961 into $1300 by 2011. Forty years of the Trifecta, working it’s black magic on investor capital.

Here’s the Dividend Growth Investor on the fund’s fatal flaws:

The fund manager constantly bought and sold stocks, which resulted in high commission costs and taxes on capital gains. Because the fund manager constantly timed the market, they did not let their investments compound at all. They were constantly chasing hot stocks, which usually results in buying high and selling low. If you constantly try to pick the top or the bottom, you are doing yourself a disservice, because you are not letting your investments compound on their own.

The other mistake with this fund was the high expense rate. Towards the end of the study period, the amount of assets had dwindled, while the amount of expense remained the same.

You would shocked at how many funds and strategies I come across, to this very day, making these same errors. Only they don’t look or seem like errors to the managers of the funds, they are the very justification for the managers’ existence. “If the market is open, and I’m at my desk, it’s game on.”

Their end-clients either don’t know any better or are enjoying the experience.


The worst mutual fund in history (ValueWalk)

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here:

Please see disclosures here.

What's been said:

Discussions found on the web
  1. EatVerts commented on Sep 22

    … [Trackback]

    […] There you will find 91732 more Info on that Topic: […]

  2. bitcoin loophole commented on Oct 03

    … [Trackback]

    […] Info on that Topic: […]

  3. 안전놀이터 commented on Nov 01

    … [Trackback]

    […] There you will find 97297 more Information to that Topic: […]

  4. Harold Jahn Canada posted on Nov 14

    … [Trackback]

    […] Here you can find 41323 additional Information to that Topic: […]

  5. rbc login online banking commented on Dec 01

    … [Trackback]

    […] Find More on on that Topic: […]

  6. td banking online commented on Dec 06

    … [Trackback]

    […] There you will find 30617 additional Info to that Topic: […]

  7. Functional Testing commented on Dec 19

    … [Trackback]

    […] There you can find 45442 more Info to that Topic: […]

  8. cbd for anxiety commented on Jan 02

    … [Trackback]

    […] Here you will find 61541 more Information on that Topic: […]

  9. agen slot joker123 commented on Jan 12

    … [Trackback]

    […] Find More to that Topic: […]

  10. Regression Testing meaning commented on Jan 17

    … [Trackback]

    […] Find More on on that Topic: […]

  11. replika rolex commented on Jan 19

    … [Trackback]

    […] Here you will find 51212 more Information to that Topic: […]

  12. wigs for women commented on Jan 23

    … [Trackback]

    […] Find More Information here to that Topic: […]