There are experts, and then there's everybody else. In finance, experts have studied the subject and follow the markets closely, so you'd expect that they'd be superior at betting on the stock market as well as on other financial matters, right? Well, perhaps not so much. As the psychologist Philip Tetlock—who did a 20-year study on the subject—famously said: Experts are poorer at predictions than dart-throwing monkeys.
Study after study has shown that low-cost index funds—investments that track major financial market indices—outperform "actively managed" mutual funds. The question of mutual-fund managers' uselfullness is hotly debated, with one study showing that only 24 percent of professional investors beat the market in the long run. If studies don't convince you, perhaps Warren Buffett will: The "Oracle of Omaha" himself recommends low-cost index funds.
A new study spells more bad news for mutual-fund managers. It looks at 84 mutual-fund managers in Sweden and how they do when it comes to their own finances. This is the first study to look directly at fund managers' stock portfolios, real-estate ownership, total wealth, and personality in order to study whether extensive knowledge and day-to-day interaction with the stock market improves one's personal wealth.