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Old 10-14-2009, 06:48 PM   #21
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I have read Bogle, Swedroe and Bernstein, et. al. and understand the
arguments for index funds ..... intellectually that is.

But I challenge you to name two better preforming funds than Vanguard's
Wellington and Wellesley over the long haul. Both are low cost managed
funds.

Wellington is Vanguard's flagship balanced fund. It has done better
than all other Vanguard's balanced funds of similar AA over all time
periods.

Cheers,

charlie
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Old 10-14-2009, 07:12 PM   #22
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But I challenge you to name two better preforming funds than Vanguard's
Wellington and Wellesley over the long haul.
I know, I know: "Past Performance Is Not Indicative of Future Results".

In this case, I certainly hope that it is - 55% of my portfolio is in these two managed funds.
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Old 10-14-2009, 11:37 PM   #23
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According to Morningstar for 15 year performance these are the top 4 funds:

GMCDX 16.57% annualized (emerging markets bond)
CGMRX 16.27% (real estate)
BRUSX 15.97% (small growth)
BRUFX 15.95% (moderate allocation)

Wellington and Wellesley:
VWELX 9.35% (moderate allocation)
VWINX 8.59% (conservative allocation)

I didn't screen for no loads or anything else, but still that looks better for past performance in about as long term as I can easily check on.
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Old 10-15-2009, 10:25 AM   #24
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Well, Just from a Early Retired guy..

1. In the First place, listening to Boggle and Vanguard has gotten you to where they/you are today.. So, if your happy with that way of Investing? Stay the course..

2. If your not? The Modertate approach to Active management is in order.. Using Market Momentum so to speak..

3. And Owning Nothing but about 80% Bonds and 20% in a 40/60 or 20/80 Balanced Fund such as a PRPFX and HSTRX..or VWINX at the Most.. ( and they all said to move into Treasuries in 08' and now into Corp. & Global Bonds for 09' , they have their hands ties to only be able to move their Specified % allowed, you can go alot more on your own )

4. And , eventhough Vanguard doesn't talk about them, since They Don't have them? Global and EMD Bond Funds, like TGBAX or TEGBX and FNMIX or PREMX.funds

5. For added Income & Ylds ? PTTDX

Just go back to the past 10 yrs and compare these to whatever else you have going "against" you and see for yourself..
and Contrary to Popular Advices? Kids don't need more than a 50/50 Mix and Seniors more than 20/80... IF they have enough that a 5% WDR will be enough to live off of.
Owning More In Equities only Lines the Pockets Of Fund families , Brokers and Wall Street..to fund THEIR Retirement and steal it from us..

Can start education with M* Bond Squad Articles and Ck out PIMCO letters..his Bond Funds handle More Tot $ than Vanguards Indexes..so what is that telling you?

and if you Don't have enough $ to retire On? Then you just have to Go for broke and follow traditional Aggressive Investing methods and be Hands On and Hope for the best.
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Old 10-15-2009, 02:35 PM   #25
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I use index funds from Vanguard - their emerging market index fund and their REIT Index fund.

Good questions by the OP.
I use both of the above Vanguard funds.

I started into emerging markets (EM) MF investing by finding seasoned managers that have good metrics such as low turnover and good performance for long periods regardless of the fees that I had to pay. With two of the four funds that I was into in the past 3 years, the managers went away. One was fired /take over. The other was promoted / replaced. On the two (SSEMX, LZOEX) that were left, I was suprised to learn that one was barely keeping up with the EAFE EM index and the other was underperforming the index. I am paying high fees for both of these.
The one that is underperforming the index is kind of following it, too.

I am surprised to conclude that in this new arena of investment, I can not find a reason to having active management. I am moving to the Vanguard EM index fund (VEIEX).

In the more traditional markets, I find index fund performance failing to the actively managed funds.

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Old 10-15-2009, 09:01 PM   #26
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From USA Today:

Active vs. passive investing: Be passive for the long haul - USATODAY.com

I remember reading somewhere that being a passive investor is a way of playing the market by not playing the market.
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Old 10-17-2009, 07:46 PM   #27
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Thank you for all replies.

@clifp: just to clarify, the 5 funds are not a single mgmt team but actually all have different teams and are in different fund families. Also, I absolutely agree that mgmt change = sell (one of my choices originally was based on having performance under current management).

@Animorph: I don't completely agree with the 10-year comment (i.e. that we have to wait another 10 years after first 10 years). On the one hand, the funds I picked about 3 years ago were indeed based on their stats back then including 10-year ones. OTOH, last 3 years also provide additional clues as to their ongoing performance. So, while I agree I should probably give more weight to more recent periods, longer periods should still be looked at. After all, if much of fund's success from 13 years ago was in the first say 3 years (which is usually TRUE according to Bogle et al. since as more funds arrive the harder it is to succeed later + additional funds arrive only after some good record), then last 10 years should not have nearly as good of a record at this point.

@FUEGO: Good points, and on closer examination I found some embarrassing issues with my apples-to-orange comparisons. The funds are in 401(k), which explains some limitations btw and made my observations more surprising. As for comparisons I tried to compare them with the ETFs/Funds that I would have bought as a substitute for each one instead of true index for same category. At closer look, I also do see some underperformance I had not noticed with my original post (I guess this reply made me extra careful, so I am glad I started the thread!)... I also added 6 months performance to better capture the results since March lows. Here are the current results... Notes:
- Comparison is now made vs real benchmark (I think!) and vs what I might replace the fund with, even though it changes the category somewhat (I guess that's still an orange: e.g. large cap instead of large cap growth).
- 10 years is not applicable in many cases NOT because the fund was not there but because the comparable index fund was not. 10 year and "since inception" histories are very good for all these vs corresponding morningstar benchmarks.

Large cap growth: FCNTX vs VIGRX & VINIX: ER 0.94%
outperform: 3/5/10yrs
underperform: 3m (vs orange), 6m, 1y(vs benchmark)
same: 3m (vs benchmark), 1yr (vs orange, i.e. overall sp500 index I can use: VINIX)

mid cap: JMCVX vs VIMSX & VOE: ER 1.06%
outperform: 3/5yr (10yr n/a);
underperform: 1yr/6m/3m

small cap: ARTVX vs NAESX & VBR: ER 1.2%
outperform: 1/3/5yr (10yr n/a)
underperform 3m/6m(vs orange, i.e. VBR)
same: 3m/6m(vs benchmark)

developed int'l: DODFX vs VEA/Foreign Lrge stock index/World stock index/MSCI EAFE NR USD: ER 0.64%
outperform in all periods! I compared this one against the 4 benchmarks but still not sure which is most appropriate since DODFX includes japan too. The only period DODFX underformed would be if I chose to see oct'08-march'09 period, but of course for any fund you can find some periods of underperformance I imagine - otherwise it IS an index fund!

emerging markets: LZEMX vs VWO: ER 1.17%
outperform: 3m/3yr(except for vwo which is same)/5yr(10yr na)
underperform: 1yr
same: 6m

Summary: quite a bit more of recent underperformance than I originally noticed but...
- artvx, dodfx, lzemx still seem really good even with high ER fees.
- fcntx is not doing too great lately but long term performance still impressive
- jmcvx is really starting to underperform (i was least sure of this one and have had least $$ here)

Action plan: dropping jmcvx in favor of VOE index; still holding on to others for now; likely to drop in another 6m-1yr if I continue to see underperformance. If I do switch, it'll be to index funds.

------------------------------------------------

FWIW

I looked at some other funds that were mentioned on this thread. For mixed stock-bond funds, I don't know a good index fund, so I just looked at what morningstar picked (though it's just an index, not a fund):

VWELX (Wellington) vs "Moderate Allocation" [1] & "Morningstar Moderate Target Risk" [2]
outperform: 1y/3y(vs 1)/5y(vs 1)/10y
underperform: 3m/9m (it would not let me do 6m)
same: 3y (vs 2)/5y (vs 2)
Summary: not too great vs [2] as of more recent dates.

VWINX (Wellesley Income) vs "Conservative Allocation" [1] and "Morningstar Moderate Target Risk" [2]
outperform: 3m(vs 1)/1y (vs 1)/3y/5y (vs 1)/10y
underperform: 3m(vs 2)/6m(vs 2)/1y (vs 2)
same: 6m(vs1)/5y (vs 2)
Summary: not too great vs [2] as of more recent dates.

PRPFX (Permanent Portfolio) vs "Conservative Allocation" [1] & "Morningstar Moderate Target Risk" [2]
outperform: 3m/1y/3y/5y/10y
underperform: 6m (vs 2)
same: 6m (vs 1)
Was it ever underperforming? 1999-2001 period it was.
Summary: awesome (and this is with ER: 0.84%)... is this apples to oranges comparison?

HSTRX (Hussman Strategic Total Return) vs "Conservative Allocation" [1] & "Morningstar Moderate Target Risk" [2]
outperform: 3y/5y/10y (vs 1)
underperform: 3m/6m/1y
same: 10y (vs 2)
Summmary: underperformed (significantly) lately

TGBAX (Templeton Global Bond Adv) vs "World Bond" & "BarCap US Agg Bond TR USD"
outperformed in all periods ending today (3m/6m/1y/3y/5y/10y), and that's with 0.67% ER!
Was it ever underperforming? well, 2000-2003 it was underperforming [2], but [2] is US only I guess, not global; 1997-2002 it was underperforming both [1] and [2]

VINEX (Vanguard Int'l Explorer) vs "Foreign Small/Mid Growth" (another good benchmark?)
outperform: 6m/1y/10y
underperform: 3y
same: 3m/5y
FUEGO, thank you for mentioning VSS. It's wierd though that VINEX (actively managed fund) has lower ER than VSS passively managed fund for same category (0.36% vs 0.38%), and both are from Vanguard!

PTTDX (PIMCO Total Return D) vs "Intermediate-Term Bond" [1] & "BarCap US Agg Bond TR" [2]
outperform: 3m (vs 2)/6m (vs 2)/1y/3y/5y/10y
underperform:3m (vs 1)/6m(vs 1)
same:
This a bond fund with 0.75% ER and has done very well.

CGMFX vs VIGRX
outperform: 3m/3y/5y/10y
underperform: 6m/1y

DODGX vs "Large Value"
outperform: 3m/6m/1y/10y
underperform: 3y
same: 5y

CGMRX vs VNQ (real estate)
outperform: 6m/3y/5y/10y
underperform:
same: 3m/1y
Very nice!.. is this apples to apples?

BRUSX vs "Small Growth"
outperform in all except same or slightly behind on 3y

FNMIX & PREMX both track emerging markets bond index well over long period even with their ~1% ER and outperform the index lately (3m-3y periods).
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Old 10-18-2009, 06:07 AM   #28
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Does anyone have PTTDX, DODGX,DODFX, CGMFX?
I have the last three. I am seriously considering putting money in PTTDX.
I have a good chunk of DODGX. It's my only non VG holding. I wouldn't buy more, but I have owned it for decades and it has generally outperformed so I just can't let go of it...
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Old 10-18-2009, 06:52 AM   #29
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I wonder about the efficient markets too. There seems to be a lot of manipulation going on. By someone, not sure who. Like the oil market last year. Maybe its just paranoia on my part, but I feel someone out there is gaming the system. Maybe I'm jealous and just want a part of the action.
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Old 10-23-2009, 05:52 PM   #30
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The funds are in 401(k)

On the one hand, the funds I picked about 3 years ago were indeed based on their stats back then including 10-year ones.
That is a lot of survivorship bias.

First, most 401(k) administrators only add new fund offerings with good performance records, and drop offerings that under perform. After employees have ridden the funds down of course. So you should expect any fund in a decent 401(k) to have better than average long term performance stats.

Second, you definitely can not do comparisons now based on stats from before you invested. So only comparison periods of less than three years are relevant in this case.

I personally index all my mutual fund equity investments because I'm a cheap coward.

Currently my highest expense ratios are 0.23% on a small IRA account, and 0.20% on a large taxable Emerging Markets fund. Portfolio X-Ray tells me that my most concentrated stock holding is the 1.00% of my assets in my current employer's stock. My most concentrated stock holding via mutual funds represents only 0.43% of my assets. That is diversification that lets me sleep at night. I know that some active funds will outperform my index investments, but to do that while also overcoming their expense disadvantage they will have to take bigger risks. Sure they may have multiple year winning streaks, but eventually risks bite. I prefer the safer indexing path.
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Old 10-23-2009, 10:46 PM   #31
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Animorph,

I should have been more precise in my language. Show me a PAIR of
BALANCED INDEX FUNDS, with the same asset allocation, with better
long term performance than Wellesley and Wellington.

Cheers,

charlie
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Old 10-23-2009, 11:08 PM   #32
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Thanks for your inputs bamsphd

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That is a lot of survivorship bias.

First, most 401(k) administrators only add new fund offerings with good performance records, and drop offerings that under perform. After employees have ridden the funds down of course. So you should expect any fund in a decent 401(k) to have better than average long term performance stats.
Good points.

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Second, you definitely can not do comparisons now based on stats from before you invested.
Why not? Fund performance does not depend on whether I have the money in it or not.
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Old 10-24-2009, 08:27 AM   #33
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3. And Owning Nothing but about 80% Bonds and 20% in a 40/60 or 20/80 Balanced Fund such as a PRPFX and HSTRX..or VWINX at the Most..

Just go back to the past 10 yrs and compare these to whatever else you have going "against" you and see for yourself..
Do you think that the past decade where valuations for equities started at a 40x PE might not be the best single period to use for evaluating the merits of stocks vs. bonds?

And with 10-yr treasury yields currently within their lowest quartile since 1871 (according to Robert Shiller's data) compared to the top quartile in 1999, one might wonder if the next 10-yrs can possibly be as good for bonds as the past 10 were.

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IF they have enough that a 5% WDR will be enough to live off of.
Owning More In Equities only Lines the Pockets Of Fund families , Brokers and Wall Street..to fund THEIR Retirement and steal it from us..
With bonds generically yielding in the low 3% area, how can you possibly expect to be able to withdraw an inflation adjusted 5% from a bond heavy portfolio? I don't see how the math works unless you're expecting 2% average annual deflation or plan to consume your principal.
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Old 10-24-2009, 10:02 AM   #34
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Everyone talks about fund expenses and Index funds but no one mentions which Index fund to put in retirement account? Can some of you please describe which index funds (percent wise) are in your retirement account?
Thanks.
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Old 10-24-2009, 12:19 PM   #35
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Second, you definitely can not do comparisons now based on stats from before you invested. So only comparison periods of less than three years are relevant in this case.
Quote:
Originally Posted by smjsl View Post
Why not? Fund performance does not depend on whether I have the money in it or not.
I'll rephrase. You can not do comparisons now based on stats from before you invested, unless your comparisons also include all the other funds you did not invest in. We already know if you include all the funds, index funds will beat the majority, but by no means all of the funds in existence.

Let me try some examples to hopefully make this clearer. Suppose (totally made up numbers), that $100 invested in fund A had balances over the last 10 years of:
$100,$110,$121,$132,$143,$155,$170,$190,$260,$150.
Suppose fund B had values of
$100,$105,$110,$115,$119,$110,$110,$130,$135,$140

Now suppose based on that wonderful historic record, three years ago you invested in fund A at $170, instead of in fund B at $110. Today you evaluate your investments, and decide that because fund A still has the better 10 year performance record, you were a genius to invest in fund A instead of fund B. Even though fund A lost you money, and fund B would have made you money! Since A still has the better ten year record, you say I know the research says B should be better over the long term, but I picked A which has still beat B over the long term, so I'm sticking with A.

Does that example make the problem clearer?

Using the classic coin-toss as the basis for an example, suppose you have a large room full of people tossing coins, and a bunch of machines also tossing coins. After seven tosses you arrive and are offered betting choices. You can bet your money splitting it between any of the coin tossers. You will win or lose based on how many heads they toss. If you bet money on a tosser caught cheating you lose all your bet. You will also need to pay each tosser part of your bet. Thankfully the tossers must disclose how much you will need to pay. You notice all the machines charge you less than any of the humans, usually something around 0.2% of your bet. The humans have lots of different fees that don't seem to make much sense, but are always higher than the machine tossers charge. A guy named Vanguard seems to be the cheapest human asking around 0.5%. There are also some advisers around the room who have been watching the tosses closely, and say for an additional fee they will invest your money for you with only those tossers with tossing skill. You notice that some of those advisers charge a lower or even no fee for this service, but seem to only pick tossers who charge the highest fees, and share some of that fee with the adviser.

Happily there are terminals in the room that allow you to not just place bets, but also to see the toss history and fees charged by every tosser. So you decide to ignore the advisers.

You have read that the smart way to invest is to just bet on the machine tossers, but lots of the humans have perfect tossing records, while the machines are closer to average. You decide to select only those humans who have so far tossed perfect heads, and who charge below average fees for a human. You split your bet between a number of these humans. After three tosses, you compare the 10 toss history of your choices, all of whom had 7 heads when you picked them, with the 10 toss history of the machines, most of which had already tossed some tails before you entered the room. Your choices have definitely not kept up their perfect tossing records since you placed your bets, but they still have better 10 toss histories than most of the machines, even if they do charge higher fees. So you think you will stick with them, except for that tosser who was replaced by a substitute tosser.

While you are waiting for the next toss, you post about your betting experience here. I try to convince you that on an after fees basis, I think you would do better to bet on the machines.
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Old 10-24-2009, 01:58 PM   #36
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Everyone talks about fund expenses and Index funds but no one mentions which Index fund to put in retirement account? Can some of you please describe which index funds (percent wise) are in your retirement account?
Thanks.
You might like this thread Lazy Portfolios

If I was starting out today with what I now know, I would like to invest in Vanguard's total world market index for my equities, Vanguard short-term bond index for my emergency fund, a money market fund as the destination for all dividends to keep my tax lots simple, and a five year TIPS ladder as my primary bond allocation. The reality that my 401(k) does not offer any of those choices, and that my existing taxable investments have significant unrealized gains that I don't want to realize makes my current investments a bit more complex.

I am currently 1/3rd US equities, 1/3 Foreign equities, and 1/3 cash and short-term bonds. The bulk of the US equities are in Vanguard's extended market index because of historical accident. The foreign equities are split 1/3 each in Vanguard's european, pacific, and emerging market indexes. The bulk of the bonds are in a 5 year TIPS ladder, and Vanguard's short-term corporate fund.
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Old 10-24-2009, 04:34 PM   #37
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bamsphd, good coin toss analogy.

I think mainly we don't have enough info to know if it's a total crap shoot or not. 10 year performance may be resting on how a fund handled two down markets as much as anything else. Not much of a test. Morningstar goes back only 15 years for screening performance. Not to mention most funds are probably younger than that anyway. Kind of hard to prove anything with that small amount of data. It would be nice if total return data was more accessible as well.

I selected my funds primarily by 10 year total return performance (including some consistancy across those 10 years), fund family performance, stewardship, and a team value approach, low turnover, and costs. Hardly any index funds showed up near the top of my screens. I do have similar ETF funds that I use for benchmarks, a couple of which are included in my portfolio. Now I have to wait 10 years to flush that old performance data out of the calculation to see how they do in the 10 years after I picked them. If they still look like above average performers I'll be happy. If not, I can move to more index funds. I don't mind average performance, but I don't think it is a lock that cheap index funds are better than all active funds. So far I've been happy with all but one of my funds, so no need to change yet.
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Old 10-24-2009, 04:36 PM   #38
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I'll rephrase. You can not do comparisons now based on stats from before you invested, unless your comparisons also include all the other funds you did not invest in. We already know if you include all the funds, index funds will beat the majority, but by no means all of the funds in existence.
Thank you for your input. You bring up the issues frequently quoted by the Authors supporting indexing. This implies that you are talking about including survivorship bias in our thinking and analysis. It also assumes that all index funds survive and other funds have mortality. Can we really assume this?

There are better and less good index funds. High costs and tracking error may be something to look out for. Some indexes are "better" than others and therefore so are their funds.

I am not some shill for the mutual fund complexes. I just see holes in the arguments.
See the link below for the Vanguard S&P 500 index (VFINX).

Vanguard 500 Index Investor (VFINX) | Performance

You will see that it's performance across all time frames listed is average, not superior. Shouldn't we see a rise in performance relative to its peer funds as the time periods lengthen?

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Old 10-24-2009, 04:48 PM   #39
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I don't mind average performance, but I don't think it is a lock that cheap index funds are better than all active funds.
Oh, I don't think anyone will say that cheap index funds are better than all active funds. But, I would say that cheap index funds, over time, are better than the vast majority of managed funds (especially after including the effects of expenses), and that it is not practical to determine which managed funds will outperform in advance. But, many people disagree, and that's what keeps the expensive managed funds afloat.
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Old 10-24-2009, 08:34 PM   #40
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that's what keeps the expensive managed funds afloat.
. . . and the markets efficient.

So I'd like to extend a special thanks to everyone who's paying full fare on the actively managed funds, because without you, I wouldn't be able to get a basically free ride buying the index. Cheers.
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Active management for free with Edgar lazyday FIRE and Money 7 04-05-2005 05:21 AM

 

 
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