Quote from Specterx:
Yes, it doesn't scale, mutual funds and the like have relatively huge positions and therefore cannot move in and out quickly to take advantage of short term moves as a day trader would. Also, the bigger the fund, the wider you need to spread your investments, and therefore your returns will move more and more in line with the overall market. MFs don't really "trade," they invest for the long term.
Mutual funds in general are pretty regulated, and I wouldn't be surprised if there are SEC-imposed limits on frequency of trades, etc. Also, AFAIK mutual funds have no access to leverage, are not allowed to short, and aren't allowed to hold positions in anything but stocks and bonds. Leverage is a big one, a really good hedge fund (those aren't subject to the same restrictions) might return like 30% a year, but to do that they might need to borrow 10-20 times their capital. I think LTCM was leveraged at 30:1 around the time of its bailout. To earn extremely high returns in day trading you likewise would need lots of leverage.
