PT - JOURNAL ARTICLE AU - Jonathan B. Berk TI - Five Myths of Active Portfolio Management AID - 10.3905/jpm.2005.500350 DP - 2005 Apr 30 TA - The Journal of Portfolio Management PG - 27--31 VI - 31 IP - 3 4099 - https://pm-research.com/content/31/3/27.short 4100 - https://pm-research.com/content/31/3/27.full AB - Five myths are debunked here. It is not true that: the return investors earn in an actively managed fund measures the skill level of the manager; the average active manager is not skilled and therefore does not add value; if managers are skilled their returns should persist—they should be able to consistently beat the market; in light of evidence that there is little or no persistence in actively managed funds' returns, investors who pick funds on the basis of past returns are not behaving rationally; and finally, because most active managers' compensation does not depend on the return they generate, their compensation is not performance–based.