The 3 Most Important Factors for
Successful Investment Management

Capital Group studied the factors leading to higher performance among mutual funds and identified three predictors of out-performance:

  • Avoiding big declines. An investment that goes down by 50% must go up 100% to get back to its starting point. An investment with a 10% decline only needs to go up 11% to recover. So successful managers win by not losing.
  • Lower costs. It stands to reason that costs matter. Between two investments with similar performance, objectives and management, take the lower cost one.
  • Significant ownership by management. Whether it's a company or a mutual fund, when management has their own money invested, their interests are aligned with shareholders and clients.

This article was last updated on 2017-03-06.