You are thinking about it wrong way.
Yes, it is hard to find a great investment manager if you want them to consistently and considerably outperform the market.
However, a person (from your family), who is not interested in investing or is bad investor will underperform market and funds much more.
You are choosing between a fund manager and your family member, not between a fund manager and a great investor. :)
Here are two possible solutions:
1. Graham solution for passive investors. Invest 50% in index fund, 50% in treasuries (or TIPs). Rebalance yearly.
2. Pick somebody you believe is good enough manager. Third Avenue. Dodge & Cox. Tweedy, Browne. Fairholme. No guarantees that they will outperform for decades, but they may do OKish. You don't need super returns of Mike Burry to do OK.
You can also mix 1 and 2, e.g. by putting the stock portion of 1 into one of the funds from 2.
The really tough part is to make sure your family follows your plan. Cause I'm sure they gonna get spooked and sell when index or fund crashes. :(((
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General note: Somehow people think: fund managers are difficult to pick, they underperform market, therefore I (my wife, my kids, my friends) should all learn how to invest and do it themselves. Cause obviously they can do better than fund managers, yes? Well, for some of us this is true, but for 90% of people it is not. Your wife, kids, friends may have no inclination or capability to invest well. So you either have to tell them to hide money under mattress or a simple strategy that will yield average/OK returns. If they are not interested/capable, telling them to spend their free time on investments will not lead to anything good. |
