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What to Expect From an Actively Managed Fund

Look for good fundamentals, not hot streaks.

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Note: This article is being re-featured as part of Morningstar's December 2014 Guide to Better Investment Picking special report. This article originally appeared Dec. 2, 2014.

Once it was  Fidelity Magellan (FMAGX). Then it was  Legg Mason Value (LMVTX). Next were American Funds’ domestic-equity funds and then  Fairholme Fund (FAIRX). Each was a flag-bearer for the cause of active management and then each was later abandoned by investors when it failed to meet expectations. These setbacks were met with a slew of articles on how active management was a failure. 

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Russel Kinnel has a position in the following securities mentioned above: OAKLX, FAIRX. Find out about Morningstar’s editorial policies.