Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
story summarizing research about the mutual fund industry.
Which is why I switched to index funds about 10 years ago.
"In study after study, year after year, it has been shown that the vast majority of actively managed mutual funds underperformed their benchmarks" -- Jim Cramer
Which is why I switched to index funds about 10 years ago.
"In study after study, year after year, it has been shown that the vast majority of actively managed mutual funds underperformed their benchmarks" -- Jim Cramer
When you say you switched to index funds you really mean exchange traded funds. You incorrectly use the term index fund and the Cramer quotes continue lol
When you say you switched to index funds you really mean exchange traded funds. You incorrectly use the term index fund and the Cramer quotes continue lol
Which is why I switched to index funds about 10 years ago.
"In study after study, year after year, it has been shown that the vast majority of actively managed mutual funds underperformed their benchmarks" -- Jim Cramer
that is a statement that is not true . what an index achieves vs an index fund are two different things .
being an index fund is no guarantee of a thing . index funds can have high fees and poor tax structure . index funds do not own all the stocks in an index , they own a representative sampling and then they trade in and out of the others to try to get a closer match to the index without actually owning every stock . that creates a tax drag and trading expenses that vary fund to fund .
just look at how poor some of these index funds are .
It not the same thing. You told of your experience of switching to index funds, which what you mean is from mutual funds to etfs. You actually give a big reason why they are not the same and continue to use the wrong terminology only to reaspond, "same thing. got it?" No it's isn't the same thing
Active mutual funds? Sometimes it is useful to actually look at, you know, data. That's what financial economists Gene Fama (Nobel Laureate at the University of Chicago Booth School of Business) and Kenneth French (Amos Tuck School of Business, Dartmouth College) did in their famous academic study published in the Journal of Finance.
Just do a google search on "Luck versus Skill in the Cross Section of Mutual Fund Returns" and you'll find downloadable PDFs in many locations.
Here is the abstract:
Quote:
Luck versus Skill in the Cross Section of Mutual Fund Returns
By Eugene F. Fama and Kenneth R. French
ABSTRACT
The aggregate portfolio of actively managed U.S. equity mutual funds is close to the market portfolio,
but the high costs of active management show up intact as lower returns to investors. Bootstrap simulations suggest that few funds produce benchmark adjusted expected returns sufficient to cover their costs. If we add back the costs in fund expense ratios, there is evidence of inferior and superior performance (non-zero true α) in the extreme tails of the cross section of mutual fund α estimates.
(emphasis added)
Think about it: few actively managed mutual funds produce benchmark adjusted expected returns sufficient to cover their costs. That is a bit like the observation that a toll bridge doesn't bring in enough money to pay the salaries of the toll collectors.
Yes, there are a few inferior and superior funds in the extreme tails of the bell curve, but the vast majority of actively managed funds do not produce sufficient alpha to pay for the salaries of the fund managers.
that is a statement that is not true . what an index achieves vs an index fund are two different things .
being an index fund is no guarantee of a thing . index funds can have high fees and poor tax structure . index funds do not own all the stocks in an index , they own a representative sampling and then they trade in and out of the others to try to get a closer match to the index without actually owning every stock . that creates a tax drag and trading expenses that vary fund to fund .
just look at how poor some of these index funds are .
Index funds the way to go. No guarantees but with history as our guide index funds are the smart choice. Lower turnover ratios too.
just look at how poor some of these index funds are
When you say "poor" it really is kind of relative when talking about active versus index funds.
From a glance the average expense ratio is under .3%, and the highest in the list is .6%. How many actively managed funds have an expense ratio under 6%?
Are there many actively managed funds with tax cost ratios under 1%? If the 1.18% is poor for the worst in that list, where does that place it among the average for actively managed stock funds?
Good point and I admit I am not sure how much the fees we are charged are. I just assumed it was similar to what a retail investor pays. I need to look into that. Given how large the firm is I would guess we get a discount of some sort.
They can be lower... or much higher. Depending on those fees some 401k plans aren't worth partaking in.
There are three important things to keep in mind when investing... diversify, keep expenses down, and pay reasonable prices for your holdings. Indexers typically get the first two right, but then blow it by assuming the third one is not important.
I think it's better to find a fund (or a strategy of buying stocks directly) that adheres to all of these points.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
