question: Why do people micromanage their investments if S & P500 beats most managed funds in the long term?
comment: That is similar to asking why do casinos make so much money from gamblers. No one believes that casinos are charities and nearly everyone understands that the odds are against them. People are overconfident of their ability. See Dunning Kruger effect.
passages: The Standard & Poor's Index Versus Active (SPIVA) quarterly scorecards demonstrate that only a minority of actively managed mutual funds have gains better than the Standard & Poor's (S&P) index benchmark. As the time period for comparison increases, the percentage of actively managed funds whose gains exceed the S&P benchmark declines further. This may be due to the preponderance of closet-index funds in the study.
   Section::::Performance.
  
  The "Wall Street Journal" reported that separately managed accounts performed much better than mutual funds in 2008, a year when the global stock market lost US$21 trillion in value.
  
  Morningstar, Inc. found that SMAs outperformed mutual funds in 25 of 36 stock and bond market categories for not only 2008, but also 2006 and 2007. The "Wall Street Journal" cited top SMA performers including Robinson Value Management Ltd’s Market Opportunity Composite Strategy, and PTI Securities & Futures LP’s Protected Index Program. 
   The S-series portfolio was not leveraged through the issuance of CMBS, although it was leveraged through a 60% RTC purchase money financing. In the N-series program where CMBS were issued, the asset managers had to be qualified by debt rating agencies (e.g., Standard & Poor's) as a condition to the agencies' giving a rating to the CMBS. This was not necessary in the S-series program
  
  Assets in the S-series portfolios were grouped geographically, so as to reduce the investors' due diligence costs.
   TAMPs help independent advisors avoid employee hiring and payroll costs related to internal administration and research, which for a modest program requiring a staff of 8–10 employees can typically cost $1 million per year in ongoing overhead.
  
  Because TAMPs serve financial advisors, individual retail investors are not able to directly invest their assets in a TAMP.
  
  Section::::History.
   "The Wall Street Journal" and "Pensions & Investments", an investment trade magazine, recognized PTI as one of the nation’s “top performing equity managers” in 2008, for the performance of its Protected Index Program, a separately managed account. In their stories, the two publications also reported that separately managed accounts (SMAs) outperformed mutual funds from 2006 through 2008, and unveiled new research from Morningstar research firm which found that SMAs beat mutual funds in 22 of 26 stock and bond categories during that time.
   Thus S&P500 forward earning yield (1/13=7.69%) is higher than 10-year Treasury note yield (3.64%), suggesting S&P500 is significantly undervalued. However, over the next twelve months, the S&P500 index fell from 1,325.19 (January 18, 2008) to 805.22 points (January 20, 2009), a drop of more than 39%.
  
  Section::::Is the Fed model mis-specified?
   Consistent with the CPPIB's mandate to maximize investment returns without undue risk of loss, they pursue a value-added strategy that seeks to deliver returns over and above a market-based benchmark over the long term. That benchmark is called the CPP Reference Portfolio and under reasonable capital market assumptions, it can generate the long-term 4.0% real rate of return required to help sustain the CPP.
   The financial scandals and market declines that occurred in 2008 have served as a catalyst for hedge fund investors to migrate towards SMAs. As such, the SMA is evolving to accommodate expected investor demand into such structures. The unified managed account is an example of an improvement on the SMA structure as it links multiple managers and strategies to a single investor-controlled account. The configuration of the unified managed account allows whatever blend of managers selected by the investor to be more capital and operationally efficient than had the same blend been structured within an SMA or within a fund structure.
   In June 2016, Sunway TaihuLight became the No. 1 system with 93 petaflop/s (PFLOP/s) on the Linpack benchmark.
  
  In November 2016, Piz Daint was upgraded, moving it from 8th to 3rd, leaving the USA with no systems under the TOP3 for only the 2nd time ever.
   While benchmarks may have much greater uniformity of instrument type than managed portfolios, the sheer number of securities – and the data maintenance issues required to reprice each one, and to ensure that the correct coupon amount and timing is used when a coupon is paid – means that detailed benchmark modeling remains extremely difficult. There are also issues involving transparency of benchmark calculations, with many of the underlying actions remaining obscure.
   Malkiel has a similar critique for methods of selecting actively managed mutual funds based upon past performance. He cites studies indicating that actively managed mutual funds vary greatly in their success rates over the long term, often underperforming in years following their success, thereby regressing toward the mean. Malkiel suggests that given the distribution of fund performances, it is statistically unlikely that an average investor would happen to select those few mutual funds which will outperform their benchmark index over the long term.
  
  Section::::Alternative view.
   Approximately 20% of all mutual funds are pure index funds. The balance are actively managed in some respect. In reality, a large percentage of actively managed mutual funds rarely outperform their index counterparts over an extended period of time because 45% of all mutual funds are "closet indexers" — funds whose portfolios look like indexes and whose performance is very closely correlated to an index (see the term R or R-squared to determine correlations) but call themselves active to justify higher management fees. Prospectuses of closet indexers will often include language such as "80% of holdings will be large cap growth stocks within the S&P 500" causing the majority of their performance to be directly dependent upon the performance of the growth stock index they are benchmarking, less the larger fees. 
   There has been an accelerating trend in recent decades to invest in passively managed mutual funds that are based on market indices, known as index funds. SPIVA's annual "U.S. Scorecard", which measures the performance of indices versus actively managed mutual funds, finds the vast majority of actively managed mutual funds underperform their benchmarks. One study claimed that over time, the average actively managed fund has returned 1.8% less than the S&P 500 index - a result nearly equal to the average expense ratio of mutual funds (fund expenses are a drag on the funds' return by exactly that ratio). Since index funds attempt to replicate the holdings of an index, they eliminate the need for — and thus many costs of — the research entailed in active management, and have a lower churn rate (the turnover of securities which lose fund managers' favor and are sold, with the attendant cost of commissions and capital gains taxes).
   In 1996, Elton, Gruber, and Blake showed that survivorship bias is larger in the small-fund sector than in large mutual funds (presumably because small funds have a high probability of folding). They estimate the size of the bias across the U.S. mutual fund industry as 0.9% per annum, where the bias is defined and measured as:
   CPPI strategies aim at offering a capital protection to its investors. Compared to a bond + call strategy, the drawback of the CPPI is that i(i) t follows a buy high sell low strategy. hence volatility will hurt the performance of the investment. and (ii) once the strategy has deleveraged, it never recovers and the investors has to wait until maturity to receive their initial investments. Benefits is that the price of a CPPI protection is much cheaper and less impacted by market movements. 
   Due to mutual fund fees and/or expenses, it is possible that an active or passively managed mutual fund could under-perform compared to the benchmark index, even though the securities that comprise the mutual fund are outperforming the benchmark, because indexes themselves have no expenses whatsoever. However, since many investors are not satisfied with a benchmark return, a demand for active management continues to exist. In addition, many investors find active management an attractive investment strategy in volatile or declining markets or when investing in market segments that are less likely to be profitable when considered as a whole. These kinds of sectors might include a sector such as small cap stocks.
   Retail money funds are offered primarily to individuals. Retail money market funds hold roughly 33% of all money market fund assets.
  
  Fund yields are typically somewhat higher than bank savings accounts, but of course these are different products with differing risks (e.g., money fund accounts are not insured and are not deposit accounts). Since Retail funds generally have higher servicing needs and thus expenses than Institutional funds, their yields are generally lower than Institutional funds.
   SMAs are popular with wealthier investors and their financial advisers as they are seen as exclusive, and offer investment options not available to those of more modest means. According to the "State of the Financial Advisory Industry: 2008" report, SMAs are popular picks among advisers at national broker/dealers and wealth managers. Advisers at national broker/dealers and wealth managers (defined as any financial adviser with a client asset minimum of $2 million or above) made much more aggressive allocations to SMAs than the average. The national broker/dealers allocated 29 percent to separately managed accounts, with 17 percent to mutual funds; wealth managers allocated 18 percent to separately managed accounts and 28 percent to mutual funds. 
   Collective intelligence underpins the efficient-market hypothesis of Eugene Fama – although the term collective intelligence is not used explicitly in his paper. Fama cites research conducted by Michael Jensen in which 89 out of 115 selected funds underperformed relative to the index during the period from 1955 to 1964. But after removing the loading charge (up-front fee) only 72 underperformed while after removing brokerage costs only 58 underperformed. On the basis of such evidence index funds became popular investment vehicles using the collective intelligence of the market, rather than the judgement of professional fund managers, as an investment strategy.
   Since 1999, the TAMP market has experienced consolidation through acquisitions and mergers to one-in-three TAMPs each year. TAMP growth and consolidation has continued in the 21st century and by 2010, TAMP assets reached $255 billion with the ten largest firms accounting for nearly all assets under management. Those firms included PNC Managed Investments, Brinker Capital, Envestnet, Fund Quest, Assetmark, Lockwood, Prudential Financial, Russell, SEI Investments and SunGard.
   The CMUCPP model is chosen by hardly any accountant in non-hyperinflationary economies even though it would automatically maintain the real value of constant real value non-monetary items, e.g. issued share capital, retained income, other shareholder equity items, trade debtors, trade creditors, etc., constant for an unlimited period of time in all entities that at least in real value at all levels of inflation and deflation - all else being equal. This is because the CMUCPP model is generally viewed by accountants as a 1970s failed inflation accounting model that requires all non-monetary items - variable real value non-monetary items and constant real value non-monetary items - to be inflation-adjusted by means of the Consumer Price Index.
   In some CPPI structured products, the multipliers are constant. Say for a 3 asset CPPI, we have a ratio of x:y:100%-x-y as the third asset is the safe and riskless equivalent asset like cash or bonds. At the end of each period, the exposure is rebalanced. Say we have a note of $1 million, and the initial allocations are 100k, 200k, and 700k. After period one, the market value changes to 120k:80k:600k. We now rebalance to increase exposure on the outperforming asset and reduce exposure to the worst-performing asset. Asset A is the best performer, so its rebalanced to be left at 120k, B is the worst performer, to its rebalanced to 60k, and C is the remaining, 800k-120k-60k=620k. We are now back to the original fixed weights of 120:60:620 or ratio-wise 2:1:remaining.
   The CPP total assets are projected to reach the following levels according to the 2012 actuarial report: (in assets):
  
  BULLET::::- $175 billion by 2013.
  
  BULLET::::- $300 billion by 2020.
  
  BULLET::::- $518 billion by 2030.
  
  The strategies used to achieve these targets are:
  
  BULLET::::- Diversification. In 1997, the CPP fund was 100% invested in government bonds, but it has since diversified not only by asset class, but also internationally.
  
  BULLET::::- Employing basic asset allocation theories, with diversification of investments as one of the objectives. The asset mix has evolved over the years as follows:
   BULLET::::- Achieving these goals requires projecting what they will cost, and when one needs to withdraw funds. A major risk to the household in achieving their accumulation goal is the rate of price increases over time, or inflation. Using net present value calculators, the financial planner will suggest a combination of asset earmarking and regular savings to be invested in a variety of investments. In order to overcome the rate of inflation, the investment portfolio has to get a higher rate of return, which typically will subject the portfolio to a number of risks. Managing these portfolio risks is most often accomplished using asset allocation, which seeks to diversify investment risk and opportunity. This asset allocation will prescribe a percentage allocation to be invested in stocks, bonds, cash and alternative investments. The allocation should also take into consideration the personal risk profile of every investor, since risk attitudes vary from person to person.
   "The Financial Times" reported in July 2011 that research by Prudential had found that 79% of polled pensioners collecting a company or private pension that year took a lump sum at their retirement, as compared to 76% in 2008. Prudential was of the view that for many retirees, a lump sum at the time of retirement was the most tax efficient option. However, Prudential's head of business development, Vince Smith Hughes, said "some pensioners are beginning to regret the way they used the tax-free cash. The days of buying a shiny new car or going on a once-in-a-lifetime holiday may be gone."
  