Financial Crisis Survival Lessons: Beats Market & Peers Since Bottom (Ariel Fund)

Patience is usually considered to be a virtue except when it comes to investing. Investors are notoriously impatient when the funds they are in underperform the market for a few years. The magic number seems to be three. 

There was an influential study of institutional investors done over a decade ago showing how poor their hiring and firing decisions were.  Institutional investors typically fired a manager after three years of subpar performance and hired a manager after three years of exceptional performance. The only problem was the newly hired funds tended to underperform for the next several years and the fired funds would outperform.

Morningstar found that the same pattern holds true with mutual fund investors. Its conclusion: “Think twice before you ditch that laggard fund in your portfolio.”

This week’s guest hails from a firm where patience is still considered a virtue and whose slogan is “Slow and Steady Wins the Race” with a tortoise as its logo. He is Charles Bobrinskoy, Vice Chairman and Head of the Investment Group at Ariel Investments where he manages their focused value strategy and spearheads its thought leadership efforts.

WEALTHTRACK #1543 broadcast on April 12, 2019.