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my prediction is indexing will be less and less effective as more and more jump on the band wagon. you cannot have everyone chasing the same stocks in the same indexes and not have an over valued mess eventually.
the value will be every where but in in indexing. more and more it will be a stock pickers market and with value everywhere but in the indexes it may be getting easier and easier to pick.
last year may have been the flipping point with 75% of manged funds at fidelity beating their indexes.
Looking down the columns for ytd once again the majority of managed funds are ahead of their indexes.
time will tell. it only makes sense that the more that do it the less effective it will become.
Last edited by mathjak107; 04-02-2013 at 03:37 AM..
I HATE questions like this because they are way too vague. When you say "mutual funds", that in itself is too vague. Different mutual funds buy different things. Some buy stocks, bonds, gold, precious metals, or a mix of some or all of these. Even within the stock category, there are large and small compnay stocks, international and U.S. based stocks, etc. The same holds true for bonds.
Then you also have to consider the situation you have in your life. A young person's investment portfolio is probably going to look different than an older person's.
Then you have issues with risk tolerance. Some people are willing and able to take a lot of risk with their investments and others are not. That's partly based on personality, but also goes back to an individual's personal circumstances.
my prediction is indexing will be less and less effective as more and more jump on the band wagon. you cannot have everyone chasing the same stocks in the same indexes and not have an over valued mess eventually.
the value will be every where but in in indexing. more and more it will be a stock pickers market and with value everywhere but in the indexes it may be getting easier and easier to pick.
last year may have been the flipping point with 75% of manged funds at fidelity beating their indexes.
Looking down the columns for ytd once again the majority of managed funds are ahead of their indexes.
time will tell. it only makes sense that the more that do it the less effective it will become.
I disagree. People will ALWAYS believe they can beat the market. It's just human nature. Even if what you say about Fidelity is true, that is just one company among thousands selling mutual funds, and just one year of data-hardly a reason to sound the death knell of indexing.
"More than 65 percent of the large-cap active managers lagged behind the S&P 500®, more than 81 percent of mid-cap funds were outperformed by the S&P MidCap 400® and over 77 percent of the small-cap funds were outperformed by the S&P SmallCap 600®, according to the study." Indexes Beat Active Funds Again in S&P Study - Forbes
By contrast, your claim about Fidelity's accomplishment is considered so insignificant that it wasn't even mentioned, and Fidelity itself doesn't tout it on their funds page. As a matter of fact, if you Google your claim "75% of managed funds at fidelity beating their indexes", the only link that comes up about the accomplishment is your comment on this forum! It seem that it isn't considered worthy of note by many.
Also there is the real issue of expense ratios and fees. As an example, I went to ING's website (they are advertising heavily in the NCAA tournament), and their expenses average well over 1%. For some funds, like their emerging markets, it's in excess of 2%. Over the course of a 30 year investment, these fees will add up to $100s of thousands lost to the investor, as compared with the .06% annual er of Vanguard's Total Stock Market Index Admiral. That, compounded with the likelihood that the fund WILL NOT beat its target index over time, makes the choice clear (to me).
If I had 500 bucks to stuff in the mattress every month for the next 25 years, where would y'all put it today to make it work more than said mattress?
I'm a fan of straight saving only because liquidity is important to me. As soon as the wife starts bringing in income I'm going to be in a position to be able to afford to lock out money until the age of 60, so wondering where it could sit locked out versus the freedom of my savings account....
The "investment" that I am really concentrating on at this time is paying off my debts.
Even if this is not making me money, I feel I can live a better life with less debt. I just paid off the remainder of a 42K personal loan that was interest only @ an APR of 5.5%....more than I can make off any safe investment.
If I had 500 bucks to stuff in the mattress every month for the next 25 years, where would y'all put it today to make it work more than said mattress?
I'm a fan of straight saving only because liquidity is important to me. As soon as the wife starts bringing in income I'm going to be in a position to be able to afford to lock out money until the age of 60, so wondering where it could sit locked out versus the freedom of my savings account....
I am starting to like target date funds with automatic investments. Low expense ratios and good returns, depending on the fund family.
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