"Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
Topic Author
Old_Dollar
Posts: 51
Joined: Sun May 06, 2018 8:27 am

"Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by Old_Dollar » Fri Mar 15, 2019 6:34 am

Active managers who claim that they would do better during periods of heightened volatility are going to have to find another argument.

For the ninth consecutive year, the majority (64.49 percent) of large-cap funds lagged the S&P 500 last year.

After 10 years, 85 percent of large cap funds underperformed the S&P 500, and after 15 years, nearly 92 percent are trailing the index.
https://www.cnbc.com/2019/03/15/active- ... exing.html

Nine years in a row of underperformance
“The figures highlight that heightened market volatility does not necessarily result in better relative performance for active investing,” the report said.
Critically, the study adjusts for “survivorship bias.” Many funds are liquidated because of poor performance, so the survivors give the appearance the overall group is doing better than it really is.
I am here solely to learn about investing.

User avatar
happysteward
Posts: 128
Joined: Tue Jun 16, 2015 11:42 am

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by happysteward » Fri Mar 15, 2019 6:44 am

Thanks Old_Dollar,

I am always amazed when I see this data...why do people still use active management....

Has the SPIVA data come out for this year?
"How much money is enough?", John Rockefeller responded, "...just a little bit more." | "He who loves money will not be satisfied with money..." Ecclesiastes 5:10

User avatar
bengal22
Posts: 1622
Joined: Sat Dec 03, 2011 6:20 pm
Location: Ohio

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by bengal22 » Fri Mar 15, 2019 11:49 am

happysteward wrote:
Fri Mar 15, 2019 6:44 am
Thanks Old_Dollar,

I am always amazed when I see this data...why do people still use active management....

Has the SPIVA data come out for this year?
When I do AARP taxes I have many that have a brokerage account and have no idea about their account activity.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

alwayshedge
Posts: 204
Joined: Sat Nov 30, 2013 7:43 pm

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by alwayshedge » Fri Mar 15, 2019 12:33 pm

happysteward wrote:
Fri Mar 15, 2019 6:44 am
Thanks Old_Dollar,

I am always amazed when I see this data...why do people still use active management....

Has the SPIVA data come out for this year?
Shhhhh... we need people to continue to use active and play the game. Leaves more of the pie for us.
I have a coworker that is always talking stocks and how his “guy” he uses is super smart and keeps him up to date on the markets. I asked him if his guy outperforms the S&P and he gave me a deer in the headlights look and said his “guy” doesn’t follow that strategy.

DB2
Posts: 200
Joined: Thu Jan 17, 2019 10:07 pm

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by DB2 » Fri Mar 15, 2019 1:01 pm

I have a friend of mine who is 100% in mutual funds with his 401K plan. Evidently, there is no S&P500 index (or the like) in his plan which I find hard to believe. I'm going to ask him to verify again. On any rate, he's finished 3-5 points behind the S&P each year.

User avatar
Taylor Larimore
Advisory Board
Posts: 27950
Joined: Tue Feb 27, 2007 8:09 pm
Location: Miami FL

"Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by Taylor Larimore » Fri Mar 15, 2019 1:40 pm

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

Bogleheads:

We wish that Jack Bogle were here to read this:

Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row

Best wishes
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

User avatar
Vulcan
Posts: 695
Joined: Sat Apr 05, 2014 11:43 pm

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by Vulcan » Fri Mar 15, 2019 1:42 pm

As a group, shouldn't they underperform every year?

Or are they occasionally able to edge out an overperformance at the expense of non-mutual fund market participants?
If you torture the data long enough, it will confess to anything. ~Ronald Coase

User avatar
bertilak
Posts: 6345
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by bertilak » Fri Mar 15, 2019 2:00 pm

Vulcan wrote:
Fri Mar 15, 2019 1:42 pm
As a group, shouldn't they underperform every year?

Or are they occasionally able to edge out an overperformance at the expense of non-mutual fund market participants?
Good question.

Proposed answer: There are periods where certain asset classes outperform the rest of the market. FANG or technology in general, finance, health-care -- all had their day. Funds that focus on those asset classes may outperform the average.

When the asset class in question develops cult-like following among active managers perhaps that can swing the overall active management average performance upward -- for a time. Trouble is, it won't last long, even if it occasionally gives the annual prize to active management. (I have no data to back that up! Just a guess.)
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

DB2
Posts: 200
Joined: Thu Jan 17, 2019 10:07 pm

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by DB2 » Fri Mar 15, 2019 2:11 pm

bertilak wrote:
Fri Mar 15, 2019 2:00 pm
Vulcan wrote:
Fri Mar 15, 2019 1:42 pm
As a group, shouldn't they underperform every year?

Or are they occasionally able to edge out an overperformance at the expense of non-mutual fund market participants?
Good question.

Proposed answer: There are periods where certain asset classes outperform the rest of the market. FANG or technology in general, finance, health-care -- all had their day. Funds that focus on those asset classes may outperform the average.

When the asset class in question develops cult-like following among active managers perhaps that can swing the overall active management average performance upward -- for a time. Trouble is, it won't last long, even if it occasionally gives the annual prize to active management. (I have no data to back that up! Just a guess.)
True. The Vanguard Healthcare, Technology, and Utility sector ETFs outperformed the S&P last year.

User avatar
Vulcan
Posts: 695
Joined: Sat Apr 05, 2014 11:43 pm

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by Vulcan » Fri Mar 15, 2019 2:13 pm

bertilak wrote:
Fri Mar 15, 2019 2:00 pm
Vulcan wrote:
Fri Mar 15, 2019 1:42 pm
As a group, shouldn't they underperform every year?

Or are they occasionally able to edge out an overperformance at the expense of non-mutual fund market participants?
Good question.

Proposed answer: There are periods where certain asset classes outperform the rest of the market. FANG or technology in general, finance, health-care -- all had their day. Funds that focus on those asset classes may outperform the average.
Yes, but each fund should be compared to their benchmark, so only the US Large Cap funds would be measured up against the S&P 500 yardstick.
As a group, these funds should more or less match the market performance net of fees, and thus underperform after fees, every year, unless there are enough non-mutual fund investors holding the underpefroming stocks.

I wonder if there's good data somewhere on what percent of overall market is held in mutual funds vs individual stocks or other vehicles (retirement funds, hedge funds, etc).
If you torture the data long enough, it will confess to anything. ~Ronald Coase

User avatar
Vulcan
Posts: 695
Joined: Sat Apr 05, 2014 11:43 pm

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by Vulcan » Fri Mar 15, 2019 2:14 pm

...or are Large Cap funds overperforming S&P 500 because other, sector funds that are more focused are underperforming their sector?
If you torture the data long enough, it will confess to anything. ~Ronald Coase

User avatar
bertilak
Posts: 6345
Joined: Tue Aug 02, 2011 5:23 pm
Location: East of the Pecos, West of the Mississippi

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by bertilak » Fri Mar 15, 2019 2:20 pm

Vulcan wrote:
Fri Mar 15, 2019 2:13 pm
Yes, but each fund should be compared to their benchmark, so only the US Large Cap funds would be measured up against the S&P 500 yardstick.
Yes, but that's not the observation that was made and for which an explanation was sought.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker, the Cowboy Poet

User avatar
Vulcan
Posts: 695
Joined: Sat Apr 05, 2014 11:43 pm

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by Vulcan » Fri Mar 15, 2019 2:36 pm

bertilak wrote:
Fri Mar 15, 2019 2:20 pm
Vulcan wrote:
Fri Mar 15, 2019 2:13 pm
Yes, but each fund should be compared to their benchmark, so only the US Large Cap funds would be measured up against the S&P 500 yardstick.
Yes, but that's not the observation that was made and for which an explanation was sought.
I guess the key distinction here is between the average mutual fund and average invested dollar.
If you torture the data long enough, it will confess to anything. ~Ronald Coase

MichCPA
Posts: 429
Joined: Fri Jul 06, 2018 9:06 pm

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by MichCPA » Fri Mar 15, 2019 2:47 pm

Vulcan wrote:
Fri Mar 15, 2019 1:42 pm
As a group, shouldn't they underperform every year?

Or are they occasionally able to edge out an overperformance at the expense of non-mutual fund market participants?
TBH, isn't the aggregate performance irrelevant? Isn't the real active vs passive crux whether an individual active fund can consistently outperform its index after fees without creep, excess risk, etc?

For example, if Dodge and Cox Stock or Fidelity Contrafund (or anybody else) could consistently outperform the S&P 500 (risk adjusted), then you could use that as an argument for active.

I say this even though VG and Fidelity index funds are my bread and butter.

User avatar
LadyGeek
Site Admin
Posts: 51946
Joined: Sat Dec 20, 2008 5:34 pm
Location: Philadelphia
Contact:

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by LadyGeek » Fri Mar 15, 2019 2:48 pm

I merged Taylor Larimore's thread into the on-going discussion.
Wiki To some, the glass is half full. To others, the glass is half empty. To an engineer, it's twice the size it needs to be.

User avatar
Vulcan
Posts: 695
Joined: Sat Apr 05, 2014 11:43 pm

Re: "Active Fund Managers Trail The S&P 500 For The Ninth Year In A Row "

Post by Vulcan » Fri Mar 15, 2019 2:49 pm

MichCPA wrote:
Fri Mar 15, 2019 2:47 pm
Vulcan wrote:
Fri Mar 15, 2019 1:42 pm
As a group, shouldn't they underperform every year?

Or are they occasionally able to edge out an overperformance at the expense of non-mutual fund market participants?
TBH, isn't the aggregate performance irrelevant? Isn't the real active vs passive crux whether an individual active fund can consistently outperform its index after fees without creep, excess risk, etc?

For example, if Dodge and Cox Stock or Fidelity Contrafund (or anybody else) could consistently outperform the S&P 500 (risk adjusted), then you could use that as an argument for active.

I say this even though VG and Fidelity index funds are my bread and butter.
The problem is that those funds are only able to consistently do it in the past:-)
If you torture the data long enough, it will confess to anything. ~Ronald Coase

User avatar
abuss368
Posts: 13429
Joined: Mon Aug 03, 2009 2:33 pm
Location: Where the water is warm, the drinks are cold, and I don't know the names of the players!

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by abuss368 » Fri Mar 15, 2019 3:34 pm

Incredible but expected. I think of Warren Buffett's bet that a simple but effective low cost S&P 500 index fund and how that beat a basket of private equity funds.

Thank you Mr. Bogle!
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

User avatar
NateH
Posts: 516
Joined: Tue Feb 27, 2007 9:51 am
Location: Minnesota

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by NateH » Fri Mar 15, 2019 3:44 pm

Critically, the study adjusts for “survivorship bias.” Many funds are liquidated because of poor performance, so the survivors give the appearance the overall group is doing better than it really is.

“The disappearance of funds remains meaningful,” the report notes. Over 15 years, 57 percent of domestic equity funds and 52 percent of all fixed income funds were merged or liquidated.
I had no idea it was this high.
4X top-twenty S&P 500 prognosticator. I'd start a newsletter, but it would only have one issue per year.

Dead Man Walking
Posts: 777
Joined: Wed Nov 07, 2007 6:51 pm

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by Dead Man Walking » Sat Mar 16, 2019 11:49 pm

Old_Dollar wrote:
Fri Mar 15, 2019 6:34 am
Active managers who claim that they would do better during periods of heightened volatility are going to have to find another argument.

For the ninth consecutive year, the majority (64.49 percent) of large-cap funds lagged the S&P 500 last year.

After 10 years, 85 percent of large cap funds underperformed the S&P 500, and after 15 years, nearly 92 percent are trailing the index.
https://www.cnbc.com/2019/03/15/active- ... exing.html

Nine years in a row of underperformance
“The figures highlight that heightened market volatility does not necessarily result in better relative performance for active investing,” the report said.
Critically, the study adjusts for “survivorship bias.” Many funds are liquidated because of poor performance, so the survivors give the appearance the overall group is doing better than it really is.
After 15 years 92% of active funds trail the index; however, an investor may have chosen to invest in the 8% of funds that beat the index or may have chosen funds that outperformed the index during shorter periods. Many investors aren’t buy and hold investors; consequently, they aren’t limited to the losers that trail the indices. These active investors may select funds based on their ability to outperform their indices over shorter time frames. The argument that most investors who chose active funds are lemmings that buy and hold losers is naive and ignorant. BTW, many have developed a tacit knowledge that enables them to determine when active managers have lost their “touch.” Most pay close attention to asset bloat and manager changes. I cashed out of Magellan when rumors of Peter Lynch retiring were made public. I also dumped Windsor when John Neff retired. I actually know a couple of investors who figured out that Bill Miller lost his touch at Legg Mason and cashed out as winners. Unfortunately, I never jumped on his bandwagon. I agree that most investors are better served investing in index funds, Life Strategy Funds, or Target Retirement Funds; however, I respect active investors who chose to invest in active funds, follow their performance, and time when to buy and sell them. Some of them are smart enough to know when they are not beating their respective indices and adjust their holdings accordingly.

DMW

pdavi21
Posts: 712
Joined: Sat Jan 30, 2016 4:04 pm

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by pdavi21 » Sat Mar 16, 2019 11:55 pm

How come you never hear about whether active global/exUS investors are beating an International Index?

TropikThunder
Posts: 1252
Joined: Sun Apr 03, 2016 5:41 pm

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by TropikThunder » Sun Mar 17, 2019 12:12 am

Dead Man Walking wrote:
Sat Mar 16, 2019 11:49 pm
Many investors aren’t buy and hold investors; consequently, they aren’t limited to the losers that trail the indices. These active investors may select funds based on their ability to outperform their indices over shorter time frames. The argument that most investors who chose active funds are lemmings that buy and hold losers is naive and ignorant.
Actually, I think that makes it worse, since prior versions of these studies show that today's winner becomes tomorrow's loser. And we've all seen studies showing that the typical investor lags the funds they hold for various reasons including poor timing. So all these investors are accomplishing is performance chasing and skating where the puck was.

And you're saying such active investors are able to identify funds "based on their ability to outperform their indices over shorter time frames" a priori? I thought the monkey throwing darts was better.
Last edited by TropikThunder on Sun Mar 17, 2019 12:16 am, edited 1 time in total.

TropikThunder
Posts: 1252
Joined: Sun Apr 03, 2016 5:41 pm

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by TropikThunder » Sun Mar 17, 2019 12:15 am

Vulcan wrote:
Fri Mar 15, 2019 2:13 pm
Yes, but each fund should be compared to their benchmark, so only the US Large Cap funds would be measured up against the S&P 500 yardstick.
That's all the study looked at:
Old_Dollar wrote:
Fri Mar 15, 2019 6:34 am
For the ninth consecutive year, the majority (64.49 percent) of large-cap funds lagged the S&P 500 last year.

After 10 years, 85 percent of large cap funds underperformed the S&P 500, and after 15 years, nearly 92 percent are trailing the index.

User avatar
Strayshot
Posts: 477
Joined: Thu Mar 05, 2015 8:04 am
Location: New Mexico

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by Strayshot » Sun Mar 17, 2019 7:18 am

Dead Man Walking wrote:
Sat Mar 16, 2019 11:49 pm
Old_Dollar wrote:
Fri Mar 15, 2019 6:34 am
Active managers who claim that they would do better during periods of heightened volatility are going to have to find another argument.

For the ninth consecutive year, the majority (64.49 percent) of large-cap funds lagged the S&P 500 last year.

After 10 years, 85 percent of large cap funds underperformed the S&P 500, and after 15 years, nearly 92 percent are trailing the index.
https://www.cnbc.com/2019/03/15/active- ... exing.html

Nine years in a row of underperformance
“The figures highlight that heightened market volatility does not necessarily result in better relative performance for active investing,” the report said.
Critically, the study adjusts for “survivorship bias.” Many funds are liquidated because of poor performance, so the survivors give the appearance the overall group is doing better than it really is.
After 15 years 92% of active funds trail the index; however, an investor may have chosen to invest in the 8% of funds that beat the index or may have chosen funds that outperformed the index during shorter periods. Many investors aren’t buy and hold investors; consequently, they aren’t limited to the losers that trail the indices. These active investors may select funds based on their ability to outperform their indices over shorter time frames. The argument that most investors who chose active funds are lemmings that buy and hold losers is naive and ignorant. BTW, many have developed a tacit knowledge that enables them to determine when active managers have lost their “touch.” Most pay close attention to asset bloat and manager changes. I cashed out of Magellan when rumors of Peter Lynch retiring were made public. I also dumped Windsor when John Neff retired. I actually know a couple of investors who figured out that Bill Miller lost his touch at Legg Mason and cashed out as winners. Unfortunately, I never jumped on his bandwagon. I agree that most investors are better served investing in index funds, Life Strategy Funds, or Target Retirement Funds; however, I respect active investors who chose to invest in active funds, follow their performance, and time when to buy and sell them. Some of them are smart enough to know when they are not beating their respective indices and adjust their holdings accordingly.

DMW
Are you trying to advocate for active active mutual fund investing? Individual investors actively picking funds that are actively managed and buying and selling over time, primarily based on the tenure of the person managing the active fund?
This potentially sounds even worse than picking individual stocks. At least when I market time with individual stocks I am working in a relatively controlled space (single company) where reasonable information is available to me at the time of the decision. How do I market time the sale of an actively managed mutual fund and all of the underlying assets without reading the mind of the manager or managers and knowing their next move.

Also, selling when funds begin to underperform is the definition of catching a falling knife and certainly not what I would define as “smart”.

I am posting on bogleheads right? Or is this browser still open on seekingalpha.com :oops:

User avatar
hdas
Posts: 819
Joined: Thu Jun 11, 2015 8:24 am

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by hdas » Sun Mar 17, 2019 10:27 am

Morgan Stanley has a couple of funds that seem to be decent in the Large Growth space since late 90's (specially CPODX).

Image
"whenever there is a randomized way of doing something, then there is a nonrandomized way that delivers better performance but requires more thought" ET Jaynes

Dead Man Walking
Posts: 777
Joined: Wed Nov 07, 2007 6:51 pm

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by Dead Man Walking » Sun Mar 17, 2019 3:09 pm

Strayshot wrote:
Sun Mar 17, 2019 7:18 am
Dead Man Walking wrote:
Sat Mar 16, 2019 11:49 pm
Old_Dollar wrote:
Fri Mar 15, 2019 6:34 am
Active managers who claim that they would do better during periods of heightened volatility are going to have to find another argument.

For the ninth consecutive year, the majority (64.49 percent) of large-cap funds lagged the S&P 500 last year.

After 10 years, 85 percent of large cap funds underperformed the S&P 500, and after 15 years, nearly 92 percent are trailing the index.
https://www.cnbc.com/2019/03/15/active- ... exing.html

Nine years in a row of underperformance
“The figures highlight that heightened market volatility does not necessarily result in better relative performance for active investing,” the report said.
Critically, the study adjusts for “survivorship bias.” Many funds are liquidated because of poor performance, so the survivors give the appearance the overall group is doing better than it really is.
After 15 years 92% of active funds trail the index; however, an investor may have chosen to invest in the 8% of funds that beat the index or may have chosen funds that outperformed the index during shorter periods. Many investors aren’t buy and hold investors; consequently, they aren’t limited to the losers that trail the indices. These active investors may select funds based on their ability to outperform their indices over shorter time frames. The argument that most investors who chose active funds are lemmings that buy and hold losers is naive and ignorant. BTW, many have developed a tacit knowledge that enables them to determine when active managers have lost their “touch.” Most pay close attention to asset bloat and manager changes. I cashed out of Magellan when rumors of Peter Lynch retiring were made public. I also dumped Windsor when John Neff retired. I actually know a couple of investors who figured out that Bill Miller lost his touch at Legg Mason and cashed out as winners. Unfortunately, I never jumped on his bandwagon. I agree that most investors are better served investing in index funds, Life Strategy Funds, or Target Retirement Funds; however, I respect active investors who chose to invest in active funds, follow their performance, and time when to buy and sell them. Some of them are smart enough to know when they are not beating their respective indices and adjust their holdings accordingly.

DMW
Are you trying to advocate for active active mutual fund investing? Individual investors actively picking funds that are actively managed and buying and selling over time, primarily based on the tenure of the person managing the active fund?
This potentially sounds even worse than picking individual stocks. At least when I market time with individual stocks I am working in a relatively controlled space (single company) where reasonable information is available to me at the time of the decision. How do I market time the sale of an actively managed mutual fund and all of the underlying assets without reading the mind of the manager or managers and knowing their next move.

Also, selling when funds begin to underperform is the definition of catching a falling knife and certainly not what I would define as “smart”.

I am posting on bogleheads right? Or is this browser still open on seekingalpha.com :oops:
I stated that most investors would be better served by investing in index funds, Life Strategy Funds, and Target Date Funds. I am not advocating investing in actively managed funds; however, I don’t believe that disparaging investors who choose a different road to Dublin. Some investors choose to use an advisor and invest in DFA funds, others invest in factor funds, some have a mix of active funds and index funds. When I began investing, there were no retail index mutual funds. Active funds require a diligence not required by index investing. One has to read the prospectus and annual report for each fund, determine if the fund is performing as might be expected according to market conditions. Active investors don’t sell a fund just because it trailed the S&P 500 for a year. They make decisions based on the knowledge that they have gained by studying all of the relevant information that applies to the fund. Many Bogleheads have stayed with value indices even though they have trailed the S&P 500 index for an extended period of time.

DMW

User avatar
Youngblood
Posts: 540
Joined: Fri Jan 04, 2008 7:18 am

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by Youngblood » Sun Mar 17, 2019 3:54 pm

Index funds beating managed funds has been going on for what seems forever. So clearly, buying everything is a more successful strategy than employing the best minds, quants, endless hours of research and using that information either by purchasing managed mutual funds or buying individual stocks.

So buying the good, bad and ugly is better because hardly anyone on a consistent basis can beat that.

If/when fundamentals or technical analysis on individual companies no longer matters because everybody is buying everything or selling everything, what happens then?
"I made my money by selling too soon." | Bernard M. Baruch

User avatar
Strayshot
Posts: 477
Joined: Thu Mar 05, 2015 8:04 am
Location: New Mexico

Re: "Active fund managers trail the S&P 500 for the ninth year in a row in triumph for indexing"

Post by Strayshot » Sun Mar 17, 2019 6:00 pm

Dead Man Walking wrote:
Sun Mar 17, 2019 3:09 pm
One has to read the prospectus and annual report for each fund, determine if the fund is performing as might be expected according to market conditions. Active investors don’t sell a fund just because it trailed the S&P 500 for a year. They make decisions based on the knowledge that they have gained by studying all of the relevant information that applies to the fund. Many Bogleheads have stayed with value indices even though they have trailed the S&P 500 index for an extended period of time.

DMW
What you describe here is market timing and “stock picking” - or really “fund picking” and would rely on the individual investor being more knowledgeable than even the fund manager (or management team). After all, if said fund isn’t performing “as expected” (whatever that means) don’t you think the fund management team would take action? Isn’t that the sales pitch of most active managed funds - the fund manager/s know more than the individual investor so pay extra to get their “expertise”?

I think people can do whatever they want with their money (I gamble with stock picking and do quite well, but it is with allocated gambling funds) but advocating for actively managed funds is un-bogleheadish.

You said “The argument that most investors who choose active funds are lemmings that buy and hold losers is naive and ignorant” is the point I am refuting and I think Jack would agree based on his proven research over many decades. Well, not sure about the lemmings part, but definitely the naive and ignorant parts. Jacks life mission was to try and help with that ignorance and he made an enormous impact.

Post Reply