Here Are A Couple Of Reasons We Use ETFs

It's not been a great year for the stock picking/mutual fund crowd.  Here's a statistic and a chart regarding this.

The quote below is from Goldman Sachs via Business Insider.com:

"Calendar year 2014 is now 1/3 behind us and for many equity portfolio managers the calendar is turning into an annus horribilis to use the phrase immortalized by Queen Elizabeth II," wrote Goldman Sachs' David Kostin in a new note to clients. "Nearly 90% of large-cap growth mutual funds, 90% of value funds, and 2/3 of core funds are trailing their style return benchmarks YTD (1%, 4%, and 2%, respectively)."

In other words, the crowd that's charging investors anywhere from 1-3% in total costs isn't keeping up with a benchmark that you can buy for about 10 basis points!

The chart via Bespoke Investment Group tells us that the Wall Street analyst crowd isn't exactly knocking the cover off the ball either.  

According to the Bespoke article, "the 50 stocks in the S&P 500 that have the most positive analyst ratings are down an average of 2.4% over the last two months, while the 50 stocks that have the most negative analyst ratings are up an average of 3.5%!  That's a pretty huge difference, and it certainly helps in part to explain why so many investors are underperforming.  Lots of fund managers and individual investors (especially) rely on the analysts at their brokerage firms for individual stock ideas.  As is evidenced by the performance data below, owning the most loved stocks has been a losing trade in the current market environment."

In other words, the crowd that's charging investors anywhere from 1-3% in total costs isn't keeping up with a benchmark that you can buy via an ETF for about 10 basis points!  

*Long ETFs related to the S&P 500 in client and personal accounts.