Down markets are not easy to swallow. The good news, however, is that active mutual fund managers tend to outperform in down markets, due in part to their more risk-averse portfolio management. However, 2008 has been an anomaly thus far; despite the fact that markets are down, active managers are, on average, down further. We can take solace from the fact that history shows that both markets and fund managers are resilient. In fact, past trends illustrate that the best times to own mutual funds have been after a year when active fund managers trailed benchmarks by a wide degree, like what has transpired so far in 2008.

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