Today’s Chart of the Day comes from Craig Lazzara's article “Persistently Disappointing.” It asks if top fund managers outperform due to skill or good luck. In EVERY fund category and over EVERY time frame, it was found to simply be good luck. To make this fact even more disturbing, top managers had an even worse chance of repeating their success going forward.
This can be attributed to the “mean reversion" theory, but that is another discussion for another day.
In summary, “In the end, you are better off not even playing the game [of trying to pick top managers]," so "sell your winners and your losers, and simply invest in the index.”