Mutual fund managers make a huge amount of money for what they do. Yet a large number of those managers don't have a single penny invested in the funds they manage. Can you truly have confidence in managers who don't have a stake in their own game?
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at Morningstar research cited in Barron's that discusses how few mutual fund managers have big stakes in their funds. According to the research, more than a third of all stock funds have managers who have no holdings at all, while only a bit more than 10% have more than $1 million invested in their own portfolios. Dan notes that Morningstar's findings showed that substantial insider ownership correlates with better performance. Dan concludes by saying it makes sense when evaluating a fund to look at whether the fund manager invests in the fund in order to judge whether his or her interests align with yours.
Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.