Thanks PrivateBanker for the SIPC correction. I’m just getting old.
What I was trying to convey with mutual fund managers, is that they have never experienced a bear market. The market has only gone up since 1972. The idea of holding cash to wait for a good buying opportunity doesn’t exist with them. They must invest the money as fast as they receive it. There is no performance factor for holding cash.
If the market ever decides to tank, everyone of these money managers has made the same bet, the market is going up.
Normally if the market did tank, investors could wait to sell hoping that the market would make a come back.
The case is different with Mutual Funds. If their holders say sell and give me cash, they have to sell into a downward spiraling market. These manager’s might be very intelligent and skillful, but their hands will be tied if and when this happens.
