The Hidden Price of a Familiar Fund Name

Note: The examples and case studies in this article are hypothetical but represent real situations I have encountered in my practice working with Washington State public employees.

Dale comes to our first video call with his statements already pulled up on his screen.
He's a facilities manager for the county. Twenty-six years in, PERS 2, hoping to retire at fifty-eight.

He's done the hard part. He saved steadily in his DCP. The money is there.

So we start going through what he actually owns. Almost all of it sits in funds from one big, famous fund company. The kind of name you'd recognize from a commercial or a stadium.

I ask him why those funds.

He pauses. “I'm not sure,” he says. “They're a name I trust. I've seen them around forever.”

I hear some version of that more often than you'd think. And it makes complete sense. We're wired to reach for what feels familiar.

But familiar and better are not the same thing. And the space between them can quietly cost you.

What the research actually found

There's a simple experiment that shows this better than anything I can say.

Researchers handed people two index funds and asked how they'd split their money. Same holdings. Same fee. Line by line, the exact same fund. The only difference was the name on the label, one familiar and one generic.

There's no financial reason to prefer one over the other. The money should land somewhere near 50/50.

It didn't. People put 65% into the familiar name and just 35% into the identical generic version1. They even guessed the unfamiliar fund was more likely to lose money, for what was literally the same investment1.

The name didn't change anything inside the fund. It only changed how people felt about owning it.

Why does that happen? Because familiarity lowers our sense of risk, whether or not the actual risk is any different2. We don't study the unfamiliar fund and decide it's riskier. We feel that it is, and then we look for reasons to back up the feeling.

And before you assume this is a rookie mistake, it isn't. Even advisors managing money for wealthy clients show the same pull toward brand-name choices5. It's human, not amateur.

Why the famous names tend to fall short

Here's the part that surprises people.

When you line up the actively managed funds from the big, famous fund families against the benchmarks they're trying to beat, most of them fall short. One analysis found that 69% of Goldman Sachs active funds lagged their benchmark or didn't survive. Even at Vanguard, a firm practically synonymous with smart investing, 63% of its active funds underperformed1.

The star manager doesn't hold up much better. S&P tracks whether top funds stay on top, and not one of the top-performing U.S. stock funds at the end of 2020 was still in the top group four years later3. Not one.

It gets worse once you realize the lineup you see today is already the highlight reel. The funds that stumbled badly were quietly closed or merged away, and their track records went with them1.

So why do the recognizable names so often trail?

Part of it is just math. Back in 1991, economist William Sharpe showed that after costs, the average actively managed dollar has to underperform the average index dollar by the amount of those costs4. Active and passive together own the whole market, so as a group the active side can't beat it after fees.

Part of it is the business model. A big fund company gets paid for gathering assets, not for beating the market. A fund that grows from one billion to ten billion collects far more in fees whether or not it ever outperforms. And the name is recognizable largely because the firm spent a fortune making it that way. That spending comes out of someone's returns. Usually yours.

This shows up beyond fund companies, too. Even in the “independent” advice world, private equity now controls close to a quarter of the assets under management6, which brings its own pressure on fees and service. None of that makes a firm bad. It just means the name on the door doesn't tell you whose interest comes first.

What to do instead

I don't want to leave you with a pile of discouraging data and no path forward. There's a better way to approach this. It just means trusting a different set of signals.

Start with your pension. Your DRS pension is a stable, lifelong foundation that most private-sector savers will never have. That foundation is exactly what lets the rest of your money take sensible market risk, instead of reaching for whatever feels safest.

From there, own broadly instead of betting narrowly. Almost no one beats the market reliably, and you can't know in advance who will, so own a wide slice of it and let it work.

Then control the things you actually can. As a CPA, this is the piece I push hardest on. You can't dictate next year's return, but you can control what you pay in fees and taxes, and over a long retirement those add up.

And ask better questions, of a fund or of the person recommending it. What does this fund cost? Can you explain why it's in my portfolio without pointing to a famous name or a recent hot streak? Are you a fiduciary, legally required to put my interest first?

A measured next step is simple. Pull up your DCP and any IRA statements and write down what you own and what each piece costs. For every holding, ask whether you can explain why it's there, beyond the name. If you can't, that's worth a conversation, not a panic.

Trusting the right things

The point of all this isn't to stop trusting. Trust matters enormously in investing, because it's what keeps you in your seat when markets get scary. The problem is never that people trust. It's that so many of us trust the wrong things.

So aim it carefully. Trust the weight of the evidence over the comfort of a logo you happen to recognize.
When Dale and I rebuilt his portfolio, nothing about it would impress anyone at a dinner party. There were no names he'd recognize from a stadium. But he could explain every piece of it, and why it was there.

That's the part that actually matters.

​Sources
1. Index Fund Advisors. “The Psychology of the Label: Familiar Names Can Make Poor Investments.” January 20, 2026. https://www.ifa.com/articles/psychology_label_familiar_names_make_poor_investments
2. Weber, E. U., Siebenmorgen, N., & Weber, M. “Communicating Asset Risk: How Name Recognition and the Format of Historic Volatility Information Affect Risk Perception and Investment Decisions.” 2005. https://scispace.com/pdf/communicating-asset-risk-how-name-recognition-and-the-format-2f8flbykyg.pdf
3. S&P Dow Jones Indices. “U.S. Persistence Scorecard.” https://www.spglobal.com/spdji/en/spiva/article/us-persistence-scorecard/
4. Sharpe, William F. “The Arithmetic of Active Management.” 1991. https://web.stanford.edu/~wfsharpe/art/active/active.htm
5. Kostovetsky, L., & Warner, J. B. “Measuring Innovation and Product Differentiation: Evidence from Mutual Funds.” Journal of Finance, 2020. https://onlinelibrary.wiley.com/doi/10.1111/jofi.12853
6. AdvizorPro. “Private Equity Ownership in the RIA Space – 2025 Trends.” September 4, 2025. https://advizorpro.com/post/private-equity-ownership-ria-space
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