This Shocking Mutual Fund Secret Increased My Sales. Here’s How.

This Shocking Mutual Fund Secret Increased My Sales. Here’s How.

If you're like most people, you might have investments in a mutual fund. When they tout how their funds are outperforming the market, they leave out certain facts. For example, mutual funds often exclude their "deceased" funds. So, an investment company could have 100 mutual funds in a 10-year period, and after five years, only 40 of the funds exist. This means that if you were an investor five years ago, you only had a 46 percent chance of picking a large-cap mutual fund winner. These two errors lead to false conclusions and opinions in several different ways. But, here's the problem: This survivorship bias leads people to spend tons of money investing in those channels. So, depending on how long it takes to close a deal, you need a fair amount of time to see if a channel or strategy is working. If you picked up the same sales process we did and implemented it in say, February, you might get different results. Do you know which channels or activities your new hire can take to achieve the success you desire?

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If you’re basing your sales strategies on this principle, you might not get the desired results.

This Shocking Mutual Fund Secret Increased My Sales. Here's How.

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If you’re like most people, you might have investments in a mutual fund. It could be a direct contribution or indirect like a 401(k).

But, here’s something you might not know: When mutual funds boast of “excellent returns” on investments, they don’t tell the whole story. When they tout how their funds are outperforming the market, they leave out certain facts.

For example, mutual funds often exclude their “deceased” funds. These are funds they started several years ago, but no longer exist. The attrition could be because of liquidation, mergers, poor investment strategy or management.

So, an investment company could have 100 mutual funds in a 10-year period, and after five years, only 40 of the funds exist. But, when the company touts its “excellent returns,” the data will exclude the 60 funds that did not survive.

In fact, one of the pioneers of the mutual fund industry, Vanguard, released a report that captured this reality. It found that for the five years ending on Dec. 31, 2011, 62 percent of surviving large-cap value funds outperformed their style benchmark. Here comes the shocking part: If you account for the deceased funds, that percentage dropped to 46 percent. This means that if you were an investor five years ago, you only had a 46 percent chance of picking a large-cap mutual fund winner.

But, this article is not about how to pick investments.

How to survive in sales

Here’s the point: This phenomenon of only calling out winners thrives on the survivorship bias. It’s the logical error of two things: One, we concentrate on the people or things that made it past some selection process. Two, we overlook those that don’t make it past the selection because of their lack of visibility. These two errors lead to false conclusions and opinions in several different…

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