Fickle Fund Investors

March 14, 2007

An unsurprising new study says that investors' loyalty to their mutual funds extends about as far as those fund's latest performance numbers:

Affluent investors say they're increasingly dissatisfied with their mutual funds' long-term performance and inconsistent returns.

In fact, only 11 of 38 top fund families managed to create meaningful customer loyalty, according to a new report released Wednesday by Cogent Research LLC.

The Cambridge, Mass.-based market researcher surveyed 4,000 wealthy mutual-fund investors. It specializes in conducting independent studies of markets such as financial services, health and consumer goods.

'The findings show it's difficult for fund companies to produce consistent returns that investors can be pleased with,' Chris Brown, managing director of Cogent, said.

But some do, he added. 'There's a small group of firms that has been able to generate sufficient long-term returns to build strong investor loyalty,' Brown said.

The study showed Vanguard Group with a wide lead over its rivals in terms of investor loyalty. 'Some firms might want to please advisers rather than the end-investor,' Brown said."


Dumping a fund because of a short-term performance stumble in favor of the latest chart-topper is, of course, a recipe for financial disaster. The best performing funds this year actually have less of a chance of beating their peers next year than do funds that performed less well (to find out why, read about the MAXadvisor Powerfund Portfolios).