Principles of Economics- Mankiw (5th) 541

Principles of Economics- Mankiw (5th) 541 - CHAPTER 25 S AV...

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CHAPTER 25 SAVING, INVESTMENT, AND THE FINANCIAL SYSTEM 559 operating the mutual fund charges shareholders a fee, usually between 0.5 and 2.0 percent of assets each year. A second advantage claimed by mutual fund companies is that mutual funds give ordinary people access to the skills of professional money managers. The managers of most mutual funds pay close attention to the developments and prospects of the companies in which they buy stock. These managers buy the stock of those companies that they view as having a profitable future and sell the stock of companies with less promising prospects. This professional management, it is argued, should increase the return that mutual fund depositors earn on their sav- ings. Financial economists, however, are often skeptical of this second argument. With thousands of money managers paying close attention to each company’s prospects, the price of a company’s stock is usually a good reflection of the com- pany’s true value. As a result, it is hard to “beat the market” by buying good stocks
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