This article quotes a study that finds that fund managers do add value when they choose to trade, but punters piling in and bailing out of their funds according to past performance + fear & greed leads to forced trading and underperformance.
In other words, mutual fund managers would do a better job if investors would just leave them alone.
Instead, the public plunges into hot markets, hot funds and hot stocks after they’ve outperformed — and then sells out again when they’ve underperformed. So money managers are forced to keep buying hot stocks even after they’ve risen too far, and to sell them after they’ve fallen too far.
It goes on to suggest that investors in passive funds and ETFs suffer from the same underperformance due to trading in and out.
It's not the conclusion of the article, but it seems to me that unless you're a great fund-picker that can spot the hot-stuff early, this indicates the best strategy to be regular buy-and-hold into a cheap tracker, a la TMF 101.
Fool on!