3 ms·

It makes me a bit nauseous whenever I read or hear that somebody wants to outperform the market with an actively managed fund that is resembling an index fund.

It makes me a bit nauseous whenever I read or hear that somebody wants to outperform the market with an actively managed fund that is resembling an index fund. Like draugadrotten writes, such an endeavor can't be free. The rule of thumb for the targeted audience of such a startup should be exactly the opposite. To never pay someone to actively manage their portfolio that is. "Data from recent decades demonstrates that the majority of actively managed large and mid-cap stock funds in United States fail to outperform their passive stock index counterparts."[0] Edit: No, seriously. What the kids they are targeting need is to learn to manage their personal finances[1] and invest very early in very boring things. With a very simple and boring strategy that takes a couple hours a year[2]. Most fund managers are essentially useless[3] and according to numerous studies very seldom outperform the market. Unless you have millions in spare change to give away to someone who gambles with your money, stay away from them. [0] http://en.wikipedia.org/wiki/Active_management#Disadvantages_of_active_management http://en.wikipedia.org/wiki/Active_management#Disadvantages... [1] http://www.reddit.com/r/personalfinance/wiki/index http://www.reddit.com/r/personalfinance/wiki/index [2] http://www.etf.com/docs/IfYouCan.pdf http://www.etf.com/docs/IfYouCan.pdf [3] https://www.youtube.com/watch?v=SwkjqGd8NC4 https://www.youtube.com/watch?v=SwkjqGd8NC4

splike 12y ago
I don't think it is promising to outperform the market at all "Our fund aims to replicate the returns of the S&P 500."
- heyalexej 12y ago
  Doing that reliably over a meaningful period of time is the problem. In my book (from the perspective of an investor) you'd need to "outperform?" the index to cover the costs of frequent trades and potential losses at no actual cost to the investor.
  - meric 12y ago
    It says replicate, not outperform. Just buy the Vanguard index fund. It's easy to replicate the returns on the index, you just use the dividends to pay the fees, since the S&P500 index includes only capital gains only and is not "Total Return" (include capital gains plus dividend).
hodwik 12y ago
"somebody wants to outperform the market with an actively managed fund that is resembling an index fund" It sounds like you don't know what these words mean.

splike 12y ago

I don't think it is promising to outperform the market at all "Our fund aims to replicate the returns of the S&P 500."

heyalexej 12y ago
Doing that reliably over a meaningful period of time is the problem. In my book (from the perspective of an investor) you'd need to "outperform?" the index to cover the costs of frequent trades and potential losses at no actual cost to the investor.
- meric 12y ago
  It says replicate, not outperform. Just buy the Vanguard index fund. It's easy to replicate the returns on the index, you just use the dividends to pay the fees, since the S&P500 index includes only capital gains only and is not "Total Return" (include capital gains plus dividend).

hodwik 12y ago

"somebody wants to outperform the market with an actively managed fund that is resembling an index fund" It sounds like you don't know what these words mean.