What happened to Magellan in 2020 is a great example of highlighting the risks of holding a very concentrated group of stocks vs. broad market exposure. Forget the constant mentioning of "downside protection" for investors, this is really just another marketing tool, and at the end of the day means very little.
It's practically a statistical certainty that over time these type of fund manager's performance eventually reverts to the mean of the pack. The longer the funds operates, the more likely this becomes. Any fund manager that does have a stand-out year or two attracts an avalanche of fund inflows (and fees) from investors chasing returns, which inevitably dilutes the returns to investors, and the fund performance drops.
You can own the SPDR fund SPY and get exposure to the entire S&P 500 Index for 9 basis points (0.09% management fee), or pay 140 basis points to pay someone to cherry pick a handful of companies for you.
It's such a no-brainer, why pay exorbitant fees to some bloke to try and find the needle when you can just own the haystack for next to nothing?
MFG Price at posting:
$34.93 Sentiment: None Disclosure: Not Held
(20min delay)