A thousand shekels invested in early 2000 in mutual funds specializing in stocks grew to NIS 1815 by the end of 2007.
Anyone impressed by this accomplishment should take note: NIS 1000 invested in Tel Aviv Securities Exchange (TASE) index funds would have grown to NIS 2590 by the end of 2007. In other words, investment in mutual funds instead of stock index funds cost investors NIS 770. The bulk of the loss - NIS 466 - came from fund managers' fees.
There is no financial justification for investing in mutual funds, and EFTs that follow stock market indexes are preferable.
This is the most obvious conclusion from TheMarker's 2007 ranking of securities based mutual funds. The ranking, published for the ninth consecutive year, examined the performance of funds during the periods 2000-2007, and 2005-2007. The ranking was prepared for TheMarker by Alpha-Beta, owned by Kobi Shemer.
In case you insist on investing in mutual funds, TheMarker's ranking also indicates who would best be the fund manager. The top fund managers include Psagot, mainly by virtue of the excellent management of its overseas funds, especially impressive because Psagot is a very large fund manager, with billions of shekels under its management. Brokers Apax and Analyst also ranked at the top.
The three leading fund managers were prominent both in terms of relatively high returns and low risk indexes.
But try something else: Go speak with your banker, and ask him or her to buy EFTs based on the TASE index of your choice. At the price of buying and selling a security, you will be getting a long-term investment in the securities market, in Israel or overseas, almost devoid of management fees. Thus, you will be securing market-level returns - the source of the bulk of investment manager yields all over the world - easily and cheaply.
And what of outperformance? Leave that to the rich, who invest in hedge funds. If you manage to match market earnings over time, you will have done well.
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