Join Early Retirement Today
Reply
 
Thread Tools Display Modes
More evidence from the Active-Passive debate
Old 10-02-2008, 12:49 PM   #1
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
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.
ats5g is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-02-2008, 01:05 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
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.
samclem is offline   Reply With Quote
Old 10-02-2008, 01:09 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,483
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.........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 10-02-2008, 02:47 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Aug 2004
Location: Houston
Posts: 1,448
Quote:
Originally Posted by FinanceDude View Post
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!
soupcxan is offline   Reply With Quote
Old 10-02-2008, 02:51 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
cute fuzzy bunny's Avatar
 
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
Eh the WSJ is full of liberals!

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

Dang it!
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
cute fuzzy bunny is offline   Reply With Quote
Old 10-02-2008, 03:39 PM   #6
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,856
Quote:
Originally Posted by soupcxan View Post
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".
__________________
*

Co-author (with my daughter) of “Raising Your Money-Savvy Family For Next Generation Financial Independence.”
Author of the book written on E-R.org: "The Military Guide to Financial Independence and Retirement."

I don't spend much time here— please send a PM.
Nords is offline   Reply With Quote
Old 10-03-2008, 01:05 PM   #7
Recycles dryer sheets
 
Join Date: Jun 2007
Posts: 183
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
innova is offline   Reply With Quote
Old 10-03-2008, 02:48 PM   #8
Full time employment: Posting here.
 
Join Date: Oct 2003
Posts: 961
Quote:
Originally Posted by soupcxan View Post
Enjoy your higher fees and lower performance!
Don't forget about higher taxes.
ats5g is offline   Reply With Quote
Old 10-03-2008, 03:28 PM   #9
Dryer sheet aficionado
 
Join Date: Nov 2007
Posts: 44
I don't pay no friggin taxes.
mexmeme is offline   Reply With Quote
Old 10-03-2008, 04:20 PM   #10
Recycles dryer sheets
bamsphd's Avatar
 
Join Date: Nov 2005
Posts: 337
Quote:
Originally Posted by mexmeme View Post
I don't pay no friggin taxes.
Ah, another investor who choose the wrong actively managed mutual funds.
bamsphd is offline   Reply With Quote
Old 10-03-2008, 04:35 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Dawg52's Avatar
 
Join Date: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,067
I wish I had been a passive investor. Passive in cd's that is.
__________________
Retired 3/31/2007@52
Investing style: Full time wuss.
Dawg52 is offline   Reply With Quote
Old 10-03-2008, 07:47 PM   #12
Full time employment: Posting here.
 
Join Date: Oct 2002
Posts: 717
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!
__________________
Random Reinforcement is Highly Addictive.
riskadverse is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
More to passive investing that just ER... mickeyd FIRE and Money 0 04-13-2008 10:46 AM
More evidence FIRE is alien to the masses... REWahoo Other topics 56 02-26-2008 12:14 PM
(FAQ archive): Invididual Stocks vs. Funds/Active Funds vs. Passive Funds Nords Early Retirement FAQs 0 10-22-2007 03:07 PM
Passive income and SRW starry night FIRE and Money 1 03-06-2006 12:02 PM
Real estate slowdown evidence... farmerEd Other topics 24 12-13-2005 10:07 AM

» Quick Links

 
All times are GMT -6. The time now is 08:11 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.