Which of the following statements, if true, would demonstrate a serious flaw in the approach of the Investment Advisor?
1. Managers of many mutual funds that have delivered the highest returns over the past several years have already used up their best investment ideas and are unlikely to sustain this level of performance in the future.
2. Mutual funds span a wide spectrum of investment styles and performance objectives and no single fund is suitable for every investor.
3. Many individual investors choose to manage their own portfolios rather than consult an investment advisor.
4. The funds that have had the strongest past performance tend to continue to outperform other funds with similar objectives for many years in the future.
5. The number of clients served by the investment advisor has declined by nearly 50% over the past 5 years.
Hello
The OA for this question is A and I am not able to convince myself here.
I've the following concerns with this option:
1. What managers of other mutual funds have done does not concern the particular manager in question. Since this is a flaw based question, the reasoning should come from the stimulus itself and hence what other managers are doing might not concern our manager in question
2. The option talks about many managers being out of ideas - Here "many" might include out manager in question or may not include him. Generalizing on this and concluding a flaw based on this rationale seems weird to me (Many can mean anything b/w 0%<x<=100%)
In my opinion, I can still reason with option B as the stimulus says that the manager will only invest in a single fund out of the chosen ones. He might then not be able to choose the best range of funds in the first place and hence investing in the one fund he decides might not be the best bet
Looking forward to hearing from the experts. GMAT planned on the 7th
