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Old 01-06-2013, 09:18 AM   #21
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yep, if there is no alpha then you don't need to pay a manager.

but determining whether your getting anything in exchange can be difficult depending on your reference.

it is about gains but it is also about risk level to get those gains.

also you have far more of a selection of managed funds that might meet specific needs at a given time.

fidelity export and multinational was a great fund to own when the dollar was weakening. if you owned it and sold it like we did and moved on to a fund with a manager better weighted for a stronger dollar you had very good performance from the two funds together.

neither fund alone beat their indexes. but by utilizing the strengths of both and escaping the weakness the performance was better then each one alone turned in for the year.

so there is another fly in trying to compare. as far as i am concerned i got alpha from both fund managers.

each one of us can only be our own judge for our own situation..

many times the weightings and goals of managers are better working together with other funds then they are individually.

those funds or indexes that owned dot coms got smashed back in the collapse. other managed funds we held were barely a blip as they were not in that sector. the nasdaq index has not come close to recovering while many small and mid cap funds funds went on to new highs.

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Old 01-06-2013, 10:52 AM   #22
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If you didn't have all your managed funds, would you replace them with just an S&P 500 index fund? If so, by all means compare them to the S&P 500. I might pick a Vanguard target retirement index or a fixed allocation index instead. Though it might be better to compare the portfolio as a whole, not each individual fund.

I have a slice and dice portfolio. I have plenty of actively managed funds in there. But they are serving within specific allocations, and I am comparing them to an index ETF that is appropriate for that allocation slice. I'm OK when a manager adds some foreign stocks to a mostly domestic fund, or EM to a mostly developed countries fund, and I even have a couple of global funds in there. But if they don't come close to the index ETF for that slice, over a good number of years, they're replaced by shares of that index ETF.

If my alternative was a lazy portfolio of 3 index funds, than I'd benchmark my funds against one of those three index funds.

The big point is that sometimes foreign does better than domestic, or growth better than value, small better than large, or EM better than everything else. Funds that specialize in these categories can't be graded against the S&P 500. That tells you nothing about how good those managers are doing. Even if they were closet indexers their fund mandate might not allow them to look anything like the S&P 500. In that case, you'll hopefully have about half the years beating the S&P 500 and half the years losing to the S&P 500. But hardly ever matching the S&P 500.

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Old 01-06-2013, 11:15 AM   #23
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foreign was up more than domestic so you are right. if the managed fund was indexed against the s&p 500 you had to beat it without regards for the manages skill for the most part.

like i said it is great to make comparisons to an index but even in indexing it is all about what index you bought as a fund.

there are many different mid-cap and smalll cap index funds you can buy .

which one you buy determines how you do against managed funds.

personally my opinion is there is to much time wasted with this stuff when it is really all about your own risk vs rewards .

there has not been alot in print either either about indexing and what can happen tax wise when you sell in a taxable account after decades of accumulating capital gains with little taxes and distributions along the way.

they can be tax torpedos un-doing years of low expense in one taxable event. especially if it trips the amt.

i do what works best for myself . following the managed models for 25 years has worked very well for me. it is the bottom line to which road you take.

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