Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

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David Jay
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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by David Jay » Sat Apr 13, 2019 11:35 am

HawkeyePierce wrote:
Sun Apr 07, 2019 6:28 pm
willthrill81 wrote:
Sun Apr 07, 2019 5:56 pm
White Coat Investor wrote:
Sun Apr 07, 2019 5:45 pm
therockbenz wrote:
Sun Apr 07, 2019 11:27 am
TLDR:. Index funds only get average returns and capture 100% of every market downturn. Active managers can sell the losers. If one wants to have above average returns use a mix. "use index options for those few asset classes that are widely covered and researched and actively managed choices for all other asset classes where inefficiencies still exist."

https://www.forbes.com/sites/robertlawt ... vestments/

Another similar article from MarketWatch.

www.marketwatch.com/amp/story/guid/BBB4 ... 2E3641FE80
Didn't read the article but I read the title and I agree with it. I'm amazed how many index funds charge 0.5% or more a year. Why pay 0.5% more than you need to?
But if you own C-class shares of the Rydex S&P 500 fund (RYSYX), the 2.33% expense ratio will make the fund's managers very happy! :wink:

It's hard to believe that that fund still has over $150 million in it. I'm really in the wrong business.
:shock:

Had to look that up myself because I didn't want to believe such an abomination could actually exist.
And it is a Class C fund which charges a 1% exit fee if held for less than a year. So if you hold it for 364 days you can actually pay 3.33%. For the SP500.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by Tdubs » Sat Apr 13, 2019 11:58 am

jeffyscott wrote:
Sat Apr 13, 2019 10:58 am
Most (or at least the majority of) funds, whether index or managed, are not good investments because most funds, whether indexed or managed, charge too much.

Due to a different discussion, I looked at all domestic equity funds that Morningstar categorizes as "index". The median ER was over 0.4%. So, based on that, the majority of index mutual funds are overcharging and not worth considering. I did not look at ETFs, but would guess that at least a majority of them are also likely not worth considering based on expenses or strategy.
I've wondered about that. VFIAX notes next to its ER of 0.04% that the average fund in its category has an ER of 0.95% (references M* but not which funds are included). I always think, "who are these guys that have an ER that high for a basic S&P Fund?"

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by willthrill81 » Sat Apr 13, 2019 12:09 pm

David Jay wrote:
Sat Apr 13, 2019 11:35 am
HawkeyePierce wrote:
Sun Apr 07, 2019 6:28 pm
willthrill81 wrote:
Sun Apr 07, 2019 5:56 pm
White Coat Investor wrote:
Sun Apr 07, 2019 5:45 pm
therockbenz wrote:
Sun Apr 07, 2019 11:27 am
TLDR:. Index funds only get average returns and capture 100% of every market downturn. Active managers can sell the losers. If one wants to have above average returns use a mix. "use index options for those few asset classes that are widely covered and researched and actively managed choices for all other asset classes where inefficiencies still exist."

https://www.forbes.com/sites/robertlawt ... vestments/

Another similar article from MarketWatch.

www.marketwatch.com/amp/story/guid/BBB4 ... 2E3641FE80
Didn't read the article but I read the title and I agree with it. I'm amazed how many index funds charge 0.5% or more a year. Why pay 0.5% more than you need to?
But if you own C-class shares of the Rydex S&P 500 fund (RYSYX), the 2.33% expense ratio will make the fund's managers very happy! :wink:

It's hard to believe that that fund still has over $150 million in it. I'm really in the wrong business.
:shock:

Had to look that up myself because I didn't want to believe such an abomination could actually exist.
And it is a Class C fund which charges a 1% exit fee if held for less than a year. So if you hold it for 364 days you can actually pay 3.33%. For the SP500.
I personally take the existence of such funds as positive proof that the market is not 'perfectly' efficient.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by Spirit Rider » Sat Apr 13, 2019 12:16 pm

willthrill81 wrote:
Sat Apr 13, 2019 12:09 pm
I personally take the existence of such funds as positive proof that the market is not 'perfectly' efficient.
It provides no such proof and reflects a fundamental misunderstanding of EMH.

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by willthrill81 » Sat Apr 13, 2019 12:40 pm

Spirit Rider wrote:
Sat Apr 13, 2019 12:16 pm
willthrill81 wrote:
Sat Apr 13, 2019 12:09 pm
I personally take the existence of such funds as positive proof that the market is not 'perfectly' efficient.
It provides no such proof and reflects a fundamental misunderstanding of EMH.
I was not referring to the EMH. There is a misunderstanding of the word efficient.
capable of producing desired results with little or no waste (as of time or materials)
https://www.merriam-webster.com/dictionary/efficient
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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by DueDiligence » Sat Apr 13, 2019 12:48 pm

nisiprius wrote:
Sun Apr 07, 2019 1:27 pm

Oddly enough, many firms that focus on actively managed mutual funds have presentations showing that active beats passive.
Oddly enough, every year, S&P, which does not sell mutual funds, annually does its SPIVA report, which never shows anything of the kind.
S&P does not sell mutual funds, but they do sell/license indices.
Like the fund companies, S&P presents results in a way that favors them.
They routinely present SPIVA results that put passive in a favorable light compared to active by:
(1) Emphasizing equal weighting of active funds rather than asset weighted (asset-weighted active performance is typically much better than equal weighted). Also asset weighted better represents actual investor results as noted by afan later in this thread.
(2) Comparing active funds to expense-free index rather than actual index funds.
(3) Sometimes their index has no investable fund that uses/licenses that index.

DD
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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by Spirit Rider » Sat Apr 13, 2019 1:04 pm

willthrill81 wrote:
Sat Apr 13, 2019 12:40 pm
Spirit Rider wrote:
Sat Apr 13, 2019 12:16 pm
willthrill81 wrote:
Sat Apr 13, 2019 12:09 pm
I personally take the existence of such funds as positive proof that the market is not 'perfectly' efficient.
It provides no such proof and reflects a fundamental misunderstanding of EMH.
I was not referring to the EMH. There is a misunderstanding of the word efficient.
capable of producing desired results with little or no waste (as of time or materials)
https://www.merriam-webster.com/dictionary/efficient
If you were not referring to EMH, what was the purpose of you claiming you had positive proof that the market was not efficient.

When it comes to market efficiency the dictionary definition of "efficient" is irrelevant. Anyone would look at MW's definition and know it has absolutely no application to the market and and absolutely incongruent with your claim.

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by David Jay » Sat Apr 13, 2019 1:34 pm

willthrill81 wrote:
Sat Apr 13, 2019 12:09 pm
I personally take the existence of such funds as positive proof that the market is not 'perfectly' efficient.
Don’t worry, I got your humor...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by willthrill81 » Sat Apr 13, 2019 2:15 pm

David Jay wrote:
Sat Apr 13, 2019 1:34 pm
willthrill81 wrote:
Sat Apr 13, 2019 12:09 pm
I personally take the existence of such funds as positive proof that the market is not 'perfectly' efficient.
Don’t worry, I got your humor...
:wink:
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by beyou » Sat Apr 13, 2019 2:21 pm

DB2 wrote:
Sun Apr 07, 2019 5:42 pm
Much of the industry despises index funds for one simple, obvious reason: they don't make anywhere near as much money on them compared to active. It's really as simple as that. This is why so much nonsense about indexing is spewed by most financial media outlets. Imagine how much more money they would make if indexing didn't exist?
Actually most fund managers have NO index funds.
They make zero from index funds.

As one who worked in the industry for most of my career, I can say I have no faith in manager capabilities to beat indices. I am like the reataurant employer who has seen the kitchen and wont eat our own cooking.

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by mrspock » Sat Apr 13, 2019 3:15 pm

therockbenz wrote:
Sun Apr 07, 2019 11:27 am
TLDR:. Index funds only get average returns and capture 100% of every market downturn. Active managers can sell the losers. If one wants to have above average returns use a mix. "use index options for those few asset classes that are widely covered and researched and actively managed choices for all other asset classes where inefficiencies still exist."

https://www.forbes.com/sites/robertlawt ... vestments/

Another similar article from MarketWatch.

www.marketwatch.com/amp/story/guid/BBB4 ... 2E3641FE80
Index funds DO sell the losers via dropping them from the index when they no longer meet the criteria of the index and/or by reducing their proportion within the index as their market cap falls (due to poor performance). This “survival bias” is why market weighted indexes outpace GDP.

The difference is index funds do things mechanically vs having a human make the call based on opinion/intuition (yes ok the S&P 500 technically has a small element of human involvement).

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by fortyofforty » Sat Apr 13, 2019 4:29 pm

mrspock wrote:
Sat Apr 13, 2019 3:15 pm
therockbenz wrote:
Sun Apr 07, 2019 11:27 am
TLDR:. Index funds only get average returns and capture 100% of every market downturn. Active managers can sell the losers. If one wants to have above average returns use a mix. "use index options for those few asset classes that are widely covered and researched and actively managed choices for all other asset classes where inefficiencies still exist."

https://www.forbes.com/sites/robertlawt ... vestments/

Another similar article from MarketWatch.

www.marketwatch.com/amp/story/guid/BBB4 ... 2E3641FE80
Index funds DO sell the losers via dropping them from the index when they no longer meet the criteria of the index and/or by reducing their proportion within the index as their market cap falls (due to poor performance). This “survival bias” is why market weighted indexes outpace GDP.

The difference is index funds do things mechanically vs having a human make the call based on opinion/intuition (yes ok the S&P 500 technically has a small element of human involvement).
Do you consider that to be illogical?
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by arcticpineapplecorp. » Sat Apr 20, 2019 9:07 am

if you need another piece of evidence:
Also working against active funds right now is the fact that they performed worse last year, on an asset-weighted basis, than index TDFs, even though the stock market was down — an environment in which active managers are thought to show more relative value.

Passive TDFs returned an average -6.18% in 2018, compared with -6.56% for active funds, according to Sway. The S&P 500 was down 6.2% last year.

source: https://www.investmentnews.com/article/ ... ng-obscene
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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by Bastiat » Sat Apr 20, 2019 2:37 pm

oxothuk wrote:
Fri Apr 12, 2019 1:56 pm
Very large investors (think Warren Buffett) can achieve higher than average returns, not by actively picking stocks but by actively picking COMPANIES to buy and manage. Or they can achieve lower than average returns, if their management skills are less than the incumbents of the firms they acquire. In either case, that's a whole different ballgame from what's open to most of us.
This is incorrect.

Investors (think Warren Buffett, Peter Lynch, other Graham disciples, etc.) can beat me the market by actively picking stocks. The average fund manager, let alone investor, does not beat the market, but that doesn't mean it's not possible.

Smaller investors have the advantage here; being a "very large investor" is a disadvantage. The law of large numbers makes this plain, but Warren Buffett also points it out:

https://www.investopedia.com/articles/s ... esting.asp
The Superinvestors of Graham-and-Doddsville
fortyofforty wrote:
Sat Apr 13, 2019 10:25 am
The only way, mathematically, for actively managed funds to beat the indexes would be if they stray outside their lanes (own securities outside the main focus of the indexes) or if individual investors as a group underperform active fund managers.
If an active manager beats the market by definition he outperforms the average, or the average underperforms him if that's how you want to put it... All a particular fund manager needs to do is own more of the winners and fewer of the losers within his lane.

I'm not an advocate of active funds, but this particular argument against them is affirming the consequent.

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by fortyofforty » Sat Apr 20, 2019 4:50 pm

Bastiat wrote:
Sat Apr 20, 2019 2:37 pm
oxothuk wrote:
Fri Apr 12, 2019 1:56 pm
Very large investors (think Warren Buffett) can achieve higher than average returns, not by actively picking stocks but by actively picking COMPANIES to buy and manage. Or they can achieve lower than average returns, if their management skills are less than the incumbents of the firms they acquire. In either case, that's a whole different ballgame from what's open to most of us.
This is incorrect.

Investors (think Warren Buffett, Peter Lynch, other Graham disciples, etc.) can beat me the market by actively picking stocks. The average fund manager, let alone investor, does not beat the market, but that doesn't mean it's not possible.

Smaller investors have the advantage here; being a "very large investor" is a disadvantage. The law of large numbers makes this plain, but Warren Buffett also points it out:

https://www.investopedia.com/articles/s ... esting.asp
The Superinvestors of Graham-and-Doddsville
fortyofforty wrote:
Sat Apr 13, 2019 10:25 am
The only way, mathematically, for actively managed funds to beat the indexes would be if they stray outside their lanes (own securities outside the main focus of the indexes) or if individual investors as a group underperform active fund managers.
If an active manager beats the market by definition he outperforms the average, or the average underperforms him if that's how you want to put it... All a particular fund manager needs to do is own more of the winners and fewer of the losers within his lane.

I'm not an advocate of active funds, but this particular argument against them is affirming the consequent.
Then that necessitates that if one active manager that owns "more of the winners and fewer of the losers" means that some other managers own more of the losers and fewer of the winners. That or individual investors as a group own more losers and fewer winners. For one active manager to outperform an index, somebody else has to underperform. Logic is what it is. It's easy to outperform, at least in the short term, especially before expenses kick in. Half of 'em will do it, if they all stay within their lanes.
Indexing works, not because of magic, but because of math. | Diligentia. Vis. Celeritas. - Jeff Cooper | Original Vanguard Diehard

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by 272 Sheep » Sat Apr 20, 2019 10:24 pm

Oakwood42 wrote:
Mon Apr 08, 2019 1:38 pm
nisiprius wrote:
Sun Apr 07, 2019 1:27 pm
The usual nonsense. The author is "President of Lawton Retirement Plan Consultants, LLC, a Registered Investment Adviser with nearly a half billion in plan assets under contract," so is self-interested. The only data is cites is from a spiffy Powerpoint slide deck, designed for Fidelity advisers to put their own names on (!), before pretending to show it as their own...

Image

This isn't dispassionate exploration, this is preloaded sales ammunition, designed to counter the trend toward passive investing.

Oddly enough, many firms that focus on actively managed mutual funds have presentations showing that active beats passive.

Oddly enough, every year, S&P, which does not sell mutual funds, annually does its SPIVA report, which never shows anything of the kind.

In any case, even if their data values are accurate, I don't know why I should care about performance in narrow categories I don't have concentrated investments in. These are the categories I use, and Fidelity's claims:

US large blend (according to Fidelity, passive beat active),
Intermediate-term bond (according to Fidelity, apparently a perfect tie--only one dot is visible),
Foreign large blend (according to Fidelity, active beat passive, 59% of the time by an average of 1%).

But is their data accurate?

The SPIVA website isn't responding, so I don't have the latest, but I do have the year-end 2017 SPIVA scorecard. Compare Fidelity's data with the SPIVA report. Fidelity says that active beat passive in three out of six international stock categories. Yet S&P says:
The authors of the S&P SPIVA Scorecard wrote:
  • During the one-year period, with the exception of actively managed international small-cap equity funds, the majority of managers investing in global, international, and emerging market funds underperformed their respective benchmarks.
  • Over the 3-, 5-, 10-, and 15-year investment horizons, managers across all international equity categories underperformed their benchmarks. Furthermore, the longer the time horizon, in general, the more funds underperformed.
Image

Image
Great information!
+2

Well done!

Carl W.

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The counterargument [Index investing is not a good strategy for most]

Post by Abarn » Mon Apr 29, 2019 11:07 am

[Thread merged into here, see below. --admin LadyGeek]

I'm sure a lot of you have already seen this article...

https://www.forbes.com/sites/robertlawt ... 7ee8433c43 - Index Investing Is Not A Good Investment Strategy For Most Investors

I don't post this because I question the passive investment approach or because I want to start an argument. I simply want to be the most educated and most informed about things that I control (and don't control for that matter) and hearing and understanding the counterargument is part of that process. Especially when it comes to something as important as personal finances and investing.

Regarding the specific fund that was referenced (The T. Rowe Price New Horizons Fund PRNHX), I'll be looking at how the fund has performed over the last 20-30 years as this is a more realistic time horizon for many people. I would also like to take the ER and AUM fee into account and then see how the overall return compares to the index.

What are your thoughts?
Last edited by Abarn on Mon Apr 29, 2019 11:38 am, edited 1 time in total.

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Re: The counterargument

Post by deltaneutral83 » Mon Apr 29, 2019 11:14 am

Abarn wrote:
Mon Apr 29, 2019 11:07 am

What are your thoughts?
My first and only thought is that he's an adviser. This entire website is devoted to debunking mostly everything he said.

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Re: The counterargument [Index investing is not a good strategy for most]

Post by magicrat » Mon Apr 29, 2019 11:19 am

So he looks backward, cherry picks his time period, and only cites 1 fund out of 500 that outperformed? Sounds like evidence for index investing, not against.

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Re: The counterargument [Index investing is not a good strategy for most]

Post by ruralavalon » Mon Apr 29, 2019 11:33 am

Abarn wrote:
Mon Apr 29, 2019 11:07 am
I'm sure a lot of you have already seen this article...

https://www.forbes.com/sites/robertlawt ... 7ee8433c43 - Index Investing Is Not A Good Investment Strategy For Most Investors

I don't post this because I question the passive investment approach or because I want to start an argument. I simply want to be the most educated and most informed about things that I control (and don't control for that matter) and hearing and understanding the counterargument is part of that process. Especially when it comes to something as important as personal finances and investing.

Regarding the specific fund that was referenced (The T. Rowe Price New Horizons Fund PRNHX), I'll be looking at how the fund has performed over the last 20-30 years as this is a more realistic time horizon for may people. I would also like to take the ER and AUM fee into account and then see how the overall return compares to the index.

What are your thoughts?
For the counter-counter argument, the linked Forbes article states "It is clear that passive outperforms in the large-cap asset classes, but in nearly every other investment category, active management appears to be the better choice."

For most asset allocations large-cap will be the largest and most important element of the allocation. So even if you swallow the "but . . . ." part of the sentence it's still best to index.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

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Re: The counterargument [Index investing is not a good strategy for most]

Post by Independent George » Mon Apr 29, 2019 11:38 am

It's the typical half-truths that correctly identify a problem while offering the wrong solution to that problem.

His first point is that it makes no sense to pay an advisor 1% AUM just to put your assets in an index fund portfolio - which is something people here agree with 100%. However, instead of arguing for a one-time flat hourly advisor fee to set up a passive portfolio, he argues for making sure the same advisors do something while paying the same 1%.

His second point is that because his cherry-picked active fund beat the benchmark, then investors should try and chase performance in selecting those active funds. The obvious problem of identifying which active funds will beat their benchmarks after fees is left unspoken, except for the implication that the same advisor being paid 1% will be able to do it.

The second point is the problem with all active investment - obviously not all active funds will not be able to beat their benchmarks after fees, and not all advisors will be able to identify which of those funds will be able to do so, either. They not only have to know what to buy, but when to buy, when to hold, and when to sell. So you can either take a gamble (and it is, indeed, gambling) that your advisor will be able to do so (with the additional handicap of needing to beat the 1.X% fees you will be paying, plus whatever additional taxes you owe on the cap gains), or you can control the one thing you can control and go 100% passive.
Last edited by Independent George on Mon Apr 29, 2019 11:41 am, edited 1 time in total.

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Re: The counterargument [Index investing is not a good strategy for most]

Post by badger42 » Mon Apr 29, 2019 11:38 am

There are places index investing works great. There are places where index investing really isn't optimal.

For example, let's look at bonds.

One extreme: An active manager adds basically zero value to a short term treasury bond fund. You're better off paying less for an algorithm. Everything in your fund has the same credit risk, and maturity/duration are trivial to manage with code.

Another extreme: An active manager actually adds quite a bit to a high yield fund, because human judgement matters - two companies with identical B credit ratings can have very different real world prospects that are not necessarily adequately captured in an index. I pay for active management (Vanguard High Yield) in this space because it adds real value. And at 13 or 23 basis points (depending on holding size), the active manager doesn't have a huge hurdle to clear to add more value than they cost.

In equities, the examples are likely less extreme, and there are also in between options (e.g. the RAFI fundamental indexes).

For "set and forget", the 3-fund portfolio still works great. That doesn't mean there aren't asset classes and edge cases where active management is worth paying for.

Though back to the article - the one fund they listed may have generated alpha (actual outperformance), more likely it's generating beta (higher volatility). We'll see in the next downturn. But absent more convincing evidence, the author is engaging in the time-honored tradition of torturing the data until it gives the answer they want.

However, I do agree 100% that there is no point in paying 1% AUM for an index portfolio. If you really want set and forget, you can pay .1% or .15% for a target date fund and get the same hands-off management.

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Re: The counterargument [Index investing is not a good strategy for most]

Post by TropikThunder » Mon Apr 29, 2019 11:46 am

badger42 wrote:
Mon Apr 29, 2019 11:38 am
There are places index investing works great. There are places where index investing really isn't optimal.
...................
For "set and forget", the 3-fund portfolio still works great. That doesn't mean there aren't asset classes and edge cases where active management is worth paying for.
Both fair points, but one is still left with the problem of knowing a priori which managers will be good at it: not have been good at it in the past but will be good at it in the future. The fact that last year’s winners are rarely next year’s winners implies this is quite difficult.

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Re: The counterargument [Index investing is not a good strategy for most]

Post by Tony-S » Mon Apr 29, 2019 12:03 pm

Abarn wrote:
Mon Apr 29, 2019 11:07 am
Regarding the specific fund that was referenced (The T. Rowe Price New Horizons Fund PRNHX), I'll be looking at how the fund has performed over the last 20-30 years as this is a more realistic time horizon for many people. I would also like to take the ER and AUM fee into account and then see how the overall return compares to the index.
I happen to have New Horizons - I've had it for about 23 years now. It's done fantastic, for sure. It's had a few flat years but overall it has pretty much driven my retirement account to where it is. (The fees are already accounted for in the rate of return.) I've recently cut back from about 50% of my retirement in this fund down to about 30% (and much of the rest in Total Stock Market and Bond funds).

I agree with what others have said that the author's choosing of one fund is deceptive. Moreover, this fund has been closed for nearly a decade so it's not like anyone can run out and buy it. Another feature of New Horizons is that it can invest in startups before their IPOs, and did so over the years, including evil Face Book and others that are quite large now. Index funds have no such luxury. It's definitely been fortunate that I've had it so long but it also got a new manager, Joshua Spencer, at the first of this month - the previous manager, Henry Ellenbogen, has left TRP after a great 10 years or so. My MO for picking active funds has pretty much relied on a 10 year Morningstar 5-Star rating and a fund manager who has a proven track record. This has not changed with New Horizons because the new manager managed their highly successful Global Technology Fund for the last several years. Nonetheless, I'll keep an eye on New Horizons over the next year or so to see how it compares to other funds. I'll bail on it if I feel the need to (but keep a small amount in it because it's closed).

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Re: The counterargument [Index investing is not a good strategy for most]

Post by Vanguard Fan 1367 » Mon Apr 29, 2019 1:29 pm

My investment life really began when I read John Bogle's The John Bogle Reader. Best 22 bucks I have ever spent and the most fruitful hours of my life with reading it. Index investing sure has helped my investment life.

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Re: The counterargument [Index investing is not a good strategy for most]

Post by staythecourse » Mon Apr 29, 2019 1:42 pm

So funny how different folks can see the same thing and get a different conclusion. I see his example as a reason NOT to try active management. When I read (paraphrasing) "Hey there is this fund that blew away the index" my next comments back is, "But how do I identify it in advance", "HOw about all the other active mid cap funds against the index. It is not possible for all the funds to beat the average ", "How do I know the manager did it with skill vs. luck which will determine if they have some ability to repeat the dominance", etc...

For me, I NEVER thought active management even made sense. When I was reading my first investing book years ago I just assumed folks knew that active management is a no go. DIdn't realize how many pages, articles, and books have to be dedicated to proving it is a difficult to near impossible task. I just that was passive management was a default thought process.

For the OP, if you want the counterargument Mr. Bogle did that in 1970's when he started what is VFINX (first retail sp500 index fund). He took ALL the equity funds that existed at the time and kept track of them going forward. Now flash forward 25+ years later and how many beat his VFINX? 5-6/300+ beat it by more then 1-2% to conservatively cover higher costs of active management. That is not a BET I would make with my life savings. If the FA does great and good luck.

Good luck.
"The stock market [fluctuation], therefore, is noise. A giant distraction from the business of investing.” | -Jack Bogle

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Re: Thoughts on this Forbes article? "Why Most Index Funds And ETFs Are Not Good Investments"

Post by LadyGeek » Mon Apr 29, 2019 4:58 pm

I merged Abarn's thread into the on-going discussion.
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