7 ms·

Now, in the long run, your typical investor is going to get the same return with active management with 2% fees as he does with an index fund at 0.1% fees. How

by chubot 14y ago

Now, in the long run, your typical investor is going to get the same return with active management with 2% fees as he does with an index fund at 0.1% fees. How? Are you claiming that active management actually works? You might be able to beat an index fund with active management, but you also might lose big. It's an illusion. Without foresight, you're just as likely to have chosen Warren Buffet as Bernie Madoff to manage your money :)

rayiner 14y ago
Corrected. I meant you'll get the same return before paying management fees.
- greedo 14y ago
  Okay, since we're not linking to any studies backing up our statements, I decided to look at the historical performance of the funds offered by my company. There are currently 40 funds available. The best performing index fund is returning around 11%, with a 0.15% expense ratio. This 11% return is beating 37 of the 40 funds. When you factor in expense ratios, it's beating all of the competing 39 funds, many by a wide, wide margin. Now obviously, this is a small sample. There are many funds out there that might be doing better. And yes, my timeframe is short; evaluating returns on a single year (especially a bull year like 2013) is foolish. But so is making generalizations about fund performance. And here are some links to support the notion that relying on actively managed funds is counterproductive: http://money.usnews.com/money/personal-finance/mutual-funds/articles/2012/10/12/study-active-funds-consistently-fail-to-beat-benchmarks http://money.usnews.com/money/personal-finance/mutual-funds/... http://business.time.com/2012/02/24/index-funds-win-again-this-time-by-a-landslide/ http://business.time.com/2012/02/24/index-funds-win-again-th... http://us.spindices.com/resource-center/thought-leadership/spiva/ http://us.spindices.com/resource-center/thought-leadership/s...
  - rayiner 14y ago
    I'm not disagreeing with you. I'm saying that for the typical investor, the actively managed funds don't outperform the indices above the line, so they lose substantially after you take out management fees.

by chubot 14y ago

rayiner 14y ago

Corrected. I meant you'll get the same return before paying management fees.

greedo 14y ago
Okay, since we're not linking to any studies backing up our statements, I decided to look at the historical performance of the funds offered by my company. There are currently 40 funds available. The best performing index fund is returning around 11%, with a 0.15% expense ratio. This 11% return is beating 37 of the 40 funds. When you factor in expense ratios, it's beating all of the competing 39 funds, many by a wide, wide margin. Now obviously, this is a small sample. There are many funds out there that might be doing better. And yes, my timeframe is short; evaluating returns on a single year (especially a bull year like 2013) is foolish. But so is making generalizations about fund performance. And here are some links to support the notion that relying on actively managed funds is counterproductive: http://money.usnews.com/money/personal-finance/mutual-funds/articles/2012/10/12/study-active-funds-consistently-fail-to-beat-benchmarks http://money.usnews.com/money/personal-finance/mutual-funds/... http://business.time.com/2012/02/24/index-funds-win-again-this-time-by-a-landslide/ http://business.time.com/2012/02/24/index-funds-win-again-th... http://us.spindices.com/resource-center/thought-leadership/spiva/ http://us.spindices.com/resource-center/thought-leadership/s...
- rayiner 14y ago
  I'm not disagreeing with you. I'm saying that for the typical investor, the actively managed funds don't outperform the indices above the line, so they lose substantially after you take out management fees.