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More evidence from the Active-Passive debate
Old 10-02-2008, 01:49 PM   #1
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More evidence from the Active-Passive debate

From Vanguard:

The Active-Passive Debate: Bear Market Performance

Quote:
Conclusion

During periods of market stress, it is common to hear that active managers can help investors by selecting securities or by maintaining a significant cash position. However, our evidence does not support this. We have shown that actively managed funds, on average, tend to underperform a broad market benchmark. We have also demonstrated that past success does not ensure future success. While performance improves slightly when compared with style benchmarks, we again found little consistency with respect to outperformance. Finally, we discovered that despite some evidence of outperformance during bear markets, bull markets were significant challenges for active funds. Overall, this analysis concludes that while there will always be a group of funds that outperforms in every market cycle, consistently selecting those winning funds in advance is difficult at best. When accounting for the difficulties in identifying bear and bull markets, security selection, and the difficulty in overcoming higher costs over the long term, we conclude that an indexed investor is not at a disadvantage when investing in bear or bull markets.
Time to dump those American Funds.
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Old 10-02-2008, 02:05 PM   #2
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Of course this conclusion is accurate, but also irrelevant. As long as there is even a tiny group of managed funds that beat the relevant index, there will be investors (including some on this board) who believe and claim with great confidence they can identify these lucky dart throwers superstar managers. And so, the debate will continue.
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Old 10-02-2008, 02:09 PM   #3
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Quote:
Originally Posted by ats5g View Post
From Vanguard:

The Active-Passive Debate: Bear Market Performance



Time to dump those American Funds.
So, the research is from a VANGUARD CFA?? Man, that is funny.........
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Old 10-02-2008, 03:47 PM   #4
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So, the research is from a VANGUARD CFA??
Oh, so I suppose the Wall Street Journal is also biased against you when they said today:

In theory, mutual funds run by stock pickers should beat index funds in a down market. The reasoning is that savvy managers, combing through financial statements, can avoid the worst performers and bulk up on the winners. An index fund, meanwhile, has its hands tied. Unfortunately for investors, in this past year's bear market, most mutual-fund managers have fallen short.

In some parts of the mutual-fund world, the performance of actively managed funds compared with indexes has been nothing short of abysmal. In the 12 months ended Sept. 30, roughly nine of every 10 actively managed midcap stock funds failed to beat the Standard & Poor's MidCap 400 Index, according to fund tracker Morningstar. During that time, the average midcap fund returned a negative 23.2%, versus the index's 16.7% decline.

In a Down Market, Many Fund Managers Were Down Even More - WSJ.com

Enjoy your higher fees and lower performance!
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Old 10-02-2008, 03:51 PM   #5
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Eh the WSJ is full of liberals!

Or...do I have my papers biases mixed up.

Dang it!
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Old 10-02-2008, 04:39 PM   #6
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In some parts of the mutual-fund world...
I see the flaw in your logic-- every active investor has their allocation in "other parts" of the mutual-fund world, not "some parts".
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Old 10-03-2008, 02:05 PM   #7
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The title of this thread is misleading. A debate implies (to me) that there are valid points and counterpoints and that the decision can be correct either way depending on what variables you use to decide... There is no debate - there are those that know and those that think they know better.

How many research papers are in existence that demonstrate superior results of actively managed funds, for any significant length of time, in any type of market?

Active funds are sold on the premise of tickling our brain's competitive spirit and tricking us into thinking we can 'beat the market'. Hope springs eternal, despite mountains of evidence to the contrary
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Old 10-03-2008, 03:48 PM   #8
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Enjoy your higher fees and lower performance!
Don't forget about higher taxes.
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Old 10-03-2008, 04:28 PM   #9
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I don't pay no friggin taxes.
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Old 10-03-2008, 05:20 PM   #10
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I don't pay no friggin taxes.
Ah, another investor who choose the wrong actively managed mutual funds.
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Old 10-03-2008, 05:35 PM   #11
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I wish I had been a passive investor. Passive in cd's that is.
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Old 10-03-2008, 08:47 PM   #12
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It always cracks me up when CNBC interviews a mutual fund manager and states that he is number 1 or 2 in his fund category because his fund has only lost 4% this year instead of the 8% average of his peers. What a testimonial - invest with him and only lose 4% of your investment!
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