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What's preventing an "active" manager from managing in a fashion similar to an indexer? It seems like with a few, inexpensive tweaks, it wouldn't be too diffic
by pbreit 11y ago
What's preventing an "active" manager from managing in a fashion similar to an indexer?
It seems like with a few, inexpensive tweaks, it wouldn't be too difficult to beat the index.
- tobltobs 11y agoLike only buy the ones whole will go up in price?
- pbreit 11y agoMy guess is that if you back test a few simple filters that you could find a point or 2. The main differences between an index fund and active management is indexers reveal their portfolios and don't trade as much.
- eru 11y agoArbitrage opportunities disappear when people exploit them. The markets are `anti-inductive'.
- gnopgnip 11y agoThe fees add up in the long term to reduce the overall returns.
- pbreit 11y agoPart of acting like an index fund would be keeping fees low.
- adestefan 11y agoThen just buy the index fund. I can buy an index fund that has fees of 0.2%. If the managed fund has fees of 1.2% that means it needs to beat the index by at least 1% to come out even. If you can beat an index by 1% while trying to replicate an index, then you're either a genius or cheating. The numbers are even worse if it's in a taxable account. That means you need to beat both the management fee and the taxes because you'll end up paying taxes for all the turnover too.
- pbreit 11y agoWell the idea is to beat the indexes on a net basis. The fees would be much lower (than 1.2%) because it would not be very active. It would be replicating the index (which lots of people can do fairly easily) but with a tweak or 2 like a slight change in weighting or trimming the 50 worst X or lopping off the 10 biggest caps. I've seen some back-testing on stuff like this that can get you that extra point or 2.
- forgetsusername 11y agoNothing. In fact, some active managers invest in ETFs as part of their...ETFs. http://www.cambriafunds.com/gmom.aspx http://www.cambriafunds.com/gmom.aspx