WIENER: Well, because the index funds have really under performed some of the great actively managed funds at Vanguard. They've got great active funds that are low cost, just like their index funds, but they out perform. I can give you a couple of examples. Their dividend growth fund run by Don Kilbright (ph), four years he's been running the fund. The fund is up about 8 or 9 percent. Every other growth and income fund at Vanguard including the biggest index funds are down 8 or 9 percent over the same period.
Is this really true???
Depends on what Wiener is actually saying. Look at his words carefully. He says, "some of the great actively managed funds" have outperformed their index benchmark. Sure. But we didn't know they were "great" until after they outperformed.
If you track the Vanguard active stock funds against their benchmark, you will see something close to 50% underperforming...depending on the time frame. Their low cost makes them competitive, but they certainly don't have a compelling record of outperformance.
Over the last 10 years, the fund or the index that tracks health care stocks is up about 140 percent. The fund that Ed Owens runs is up 140 percent. I mean and that's an index against a managed fund, you can't buy an index. You've got to have an operating expense in there. He just completely blows most people away, because he picks great stocks.
This is a diversion, besides being spurious benchmarking (VGHCX has a sizable foreign component, so the comparison isn't valid). More importantly, Wiener is glossing over his total failure to point investors to the more profitable sector funds. Vanguard has 4 sector funds, while the remainder of their mutual funds are much more diversified. Wiener has consistently recommended VGHCX, but over the past 10 years, the other three sector funds have far surpassed VGHCX. Precious Metals has returned an annual average of 17.85%, Energy has returned 16.08% and REIT has returned 9.74%. Health Care is dead last with 8.82%.
They guy is trying to sell his newsletter, and I don't blame him for selectively quoting facts. That's his job. But intelligent investors don't have to fall for his spiel.