In response to my assertion that index funds tend to outperform actively managed funds on average, a friend asked me: 'Why is that an important metric?'
While reading Otar's book, I revisited that thought. For a post-ER (i.e. withdrawal portfolio), the really important attribute is how the selected funds help with portfolio longevity given your, hopefully, safe withdrawal rate.
For eg: an equity fund that has lower volatility than the index, but with slightly lower returns, could provide better portfolio longevity than the index fund.
Has anyone else thought along these lines? If so, are there any metrics available to measure this?
Ofcourse, the usual 'past performance is not a predictor of future performance' applies, but if all funds are compared with a performance metric that is specially suited for withdrawal portfolios, it would provide important information.
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