There is a fundamental flaw in pointing to PRWCX or any of the very small minority of funds that have a track record of outperformance.

This information is only useful to an investor in hindsight. No one knows if over the next 15 years this fund will outperform or underperform. If you could go back in a time machine and pick the funds that outperform the market over a certain period, that would be great.

For an investor today deciding where to put their money over the next 15–50 years, they have no reason to believe PRWCX will outperform the market over that time.

Since investors don’t have the luxury of making investments in hindsight, the rational thing to do is embrace the fact that markets are relatively efficient and take the market return at the lowest possible cost.

Economic policy wonk by day. Personal finance writer by night. I write about investing, debt, and all things related to money. Editor of Making of a Millionaire

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