Which is the most overrated financial advice

Fund managers are totally overrated

According to their own assessment, the financial literacy of over half of Germans is miserable.But if you think that fund managers are much more familiar with financial investments, you are mistaken. The fund managers may think so of themselves, but the facts speak a different language.


"Financial genius" no better than "financial illiterate"

Germany has once again held a sad leadership position - this time in matters of financial education. Because when asked "Have you ever received financial education", 53 percent of Germans answered "No". That was the result of a survey in 2013. Or, to put it another way, 35 million German adults came out as “financially illiterate”. This puts us at the top in Europe.

Fortunately, you can do something about it by reading my blog. I can only recommend that you continue your education in financial matters in general. Because many supposed experts are absolutely the wrong people to talk to when it comes to investments. This was shown once again by a study by Stiftung Warentest. This has determined that in the last five years just 4.7 percent of all fund managers have generated a higher return than the MSCI World. This improved by 13.4 percent per year.

Briefly for explanation:

The MSCI World is one of the most important stock indices worldwide and reflects the development of the stocks of 23 industrialized countries around the world. It is now the case that the stated goal of all fund managers is to beat the market through reallocations, targeted stock selection or a feeling for the trend. To represent the devastatingly lousy work record of the fund managers again in other numbers:

Only 8 out of 169 funds deliver a higher return than the MSCI for US stocks over a 10-year period. Over the same period, 60 of 225 products in European equities are currently outperforming the benchmark index.

Financial investments “work” like a three-wheeled car

Back to the sobering result of the Stiftung Warentest study. To emphasize again: Not even 5 percent of all fund managers achieve their goal. You have to let that melt in your mouth, considering that these ladies and gentlemen juggle with their customers' money, only to throw it in the sand for the most part. And for this they collect a lot of money, because they do not work on a success basis, but calculate each of their movements - even if it is in the class .. ...

If other people worked like this, there would soon be absolute chaos.

Let's just take an example:

The stated goal of an automaker is, of course, to design a car so that afterwards you can just sit in and drive off. But - for whatever reason - the target is missed and the car only has three wheels, the engine stutters and the steering wheel is completely missing. Would you buy such a vehicle? Would you ever trust this automaker again?

And something else:

Would you be ready to jump in an extra bonus for a normally functioning vehicle? Hardly, because a functioning car ex works should be a matter of course. This is different with the - admittedly very rare - successful cases of fund managers. Because the stock brokers, who are already highly paid, usually have a higher return silvered with a so-called "performance fee" which, together with the management fee and the usual front-end load, reduces your valuable return again.

However, if the investment goes wrong, only one person will look into the tube - namely you. To refer to our car example again: If you found at home that your new acquisition had minor or major flaws, you would immediately take it back to the car dealer and only accept the whole thing if it works as advertised. However, you cannot do that with an investment that has gone wrong.

In fact, investors do even worse working with fund managers than if they had invested their money in fixed income investments. And the most surprising thing for me is that German savers still trust the so-called financial experts again and again and hold onto unprofitable products for too long. Otherwise so mature and picky, the Germans suddenly seem nailed up when it comes to investments.

Pathetic results from actually promising funds

Often the choice of securities by the supposed experts is based on false assumptions.

Here are three examples from the recent past:

  • The LBBW Aktien Deutschland fund has developed very well since the end of the financial crisis. Nevertheless, it always fell short of expectations. In the past five years, it has only brought investors a 45 percent return. And that in a "bull phase" with prices rising significantly. Not once did he achieve the result that investors could have achieved with a simple DAX index fund! Normally, a DAX index fund increased by a good 60 percent in the comparable period, other good equity funds even achieved double the return. In the meantime, the fund manager has been replaced by LBBW. But if it had been up to the investors, nothing should have happened. Because the fund's poor performance had no impact on their behavior. The managed funds are still at 96 million euros.

  • The MEAG EuroKapital, which is a mixture of shares and bonds, developed in a similarly inglorious way. Its share is now bobbing at a lower level than it was ten years ago. This is absolutely terrifying in terms of the possibilities that are normally possible with the capital behind it. You can already see this from the fact that other mixed funds have doubled their value in the same period!

  • Another more than miserable “achievement” of the fund managers can be seen in the Berenberg Systematic Approach European Stockpicker A. Behind this is a systematic approach, which is basically okay with an investment, as well as a supposedly intelligent stock selection. The idea is simple and sounds logical: only good stocks are selected. This should make it easy to beat the broad market, which inevitably always includes crisis companies that are depressing the result. Nonetheless, all the systematic did not help with the “Berenberg”: For investors, there was only a one-third increase in 2010 - on the European market as a whole, on the other hand, shares rose by almost half. The heads of fund management now self-critically say that there is a need for change. It remains to be seen whether it will work.

No more "listening to experts"

In my opinion, the examples make it abundantly clear that active funds are losing money. Why is that? In my opinion, the highly paid fund managers believe too much in their stuck strategies, do not question them, rest on one-off successes, learn nothing, rely on their supposed “expert” knowledge and yet cannot be right - at least in very few cases.

The fact that many private investors still entrust their money to a fund manager may be due to a lack of information, but also to convenience and too much "listening to experts". The self-proclaimed financial geniuses just have to shout loud enough and they'll be believed.


You shouldn't make these mistakes anymore. You now know too much for that. If you have relied on funds, you should critically question their results after three, at the latest five years. And if these are not as positive as promised or expected, invest your money more profitably. You deserve it, your family deserves it - that you can live your life financially the way you want it to be.


My tip are ETFs. They are transparent, inexpensive and simple. Stock markets are mapped one-to-one so that you, the investor, can easily understand the development of the values. With ETFs you can save in the long term and make provisions for your old age. They contain the advantages of two worlds because they represent something between stocks and funds.


And if you are wondering why you as a private investor are often not offered ETFs at all, I can give you the simple reason for this:
Fund companies and banks mainly earn from commissions and transaction costs. You do not have to do either of these with ETFs. That is why these investment opportunities are withheld from you by fund managers. If you ask me, that is exactly one reason you should be particularly interested in this type of investment.