Poll:How much of an indexer are you?

[utrecht]

There are some really good, low cost, actively managed funds like Fidelity ContraFund.
It has a 10 yr return of 9.6% and an expense ratio of 0.64%.

Compare that to VFINX at a 10 yr return of 7.5% and an expense ratio of 0.17%.

ContraFund after expenses..9% over 10 yrs
Vanguard SP500 after exp...7.3% over 10 yrs.

That's a big difference over a long enough time period to be significant.

If you want to go back further, how about 20 yrs?

FCNTX after exp...9.85%
VFINX after exp...8.42%

 

[RunningBum]

There are some really good, low cost, actively managed funds like Fidelity ContraFund.
It has a 10 yr return of 9.6% and an expense ratio of 0.64%.

Compare that to VFINX at a 10 yr return of 7.5% and an expense ratio of 0.17%.

ContraFund after expenses..9% over 10 yrs
Vanguard SP500 after exp...7.3% over 10 yrs.

That's a big difference over a long enough time period to be significant.

If you want to go back further, how about 20 yrs?

FCNTX after exp...9.85%
VFINX after exp...8.42%

For me, that fund is VG PRIMECAP.

1 yr VFINX 7.28 VPMCX 8.80
3 yr VFINX 17.13 VPMCX 21.82
5 yr VFINX 17.17 VPMCX 18.97
10 yr VFINX 7.77 VPMCX 10.50

YTD, however, it's lagging. VFINX 1.17, VPMCX 0.70.

Unfortunately it's a closed fund now, but since I'm already in I can add $25K/yr. 0.44% expense ratio, 0.35% with admiral shares.

Most of what else I have invested is in index funds.

 

[DEC-1982]

About managed funds, two comments:

At some point their streak may run out. Bill Miller had an S&P 500 beating streak for 15 years (every single year) and then he went down hard. I hear he is doing better recently.

The second problem is how does one know in advance that we have a winner (e.g. a Warren Buffett or a Peter Lynch)? And that really is the crux of the problem. There are several market beating funds over the short run AND over the long run but one has to be lucky to know this in advance. I was lucky NOT to put money into Magellan around the time when Lynch left.

Mind you, I use VG Healthcare fund (my only non-index fund), but I don't have the bulk of my funds there.

 

[mickeyd]

I've been all in for passive investing for 10+ years.

Simplicity rules my life.

 

[nash031]

There are some really good, low cost, actively managed funds like Fidelity ContraFund.
It has a 10 yr return of 9.6% and an expense ratio of 0.64%.

Compare that to VFINX at a 10 yr return of 7.5% and an expense ratio of 0.17%.

ContraFund after expenses..9% over 10 yrs
Vanguard SP500 after exp...7.3% over 10 yrs.

That's a big difference over a long enough time period to be significant.

If you want to go back further, how about 20 yrs?

FCNTX after exp...9.85%
VFINX after exp...8.42%

Did someone say managed funds never beat indexed funds? I don't recall that. It's just that whenever Contra's fund manager changes over (I think it's had the same dude for 25 years), the fund will probably change. You have the option to move your money then, of course, but as I mentioned before one commonality is that with both types of funds, you don't personally have control over the return. Thus, I try to control that which I can: fees and taxes. I own one fund with an ER of .17 or higher (0.2, in fact) and I only owe that because I see no reason to cause a taxable event to move it right now. My overall portfolio ER is 0.04 thanks to Admiral shares and TSP. Actively managed funds may beat me by .5% (assuming you're in those with a 0.56 ER and not those that charge 1 or 1.5), and I'm fine with that. I know that I won't move my money around and I'll be achieving very good returns. YMMV.

 

[utrecht]

I understand all of that and I do have about 40% of my money in index funds. My point was that there are some managed funds that are worth looking into. Especially if you are limited to what funds are available to you in a 401k.

 

[nash031]

No worries! Interestingly, VTSAX (total stock market) takes that 10-yr "indexed" return up to 8.3%, which closes the return gap you noted by 50% and reduces the expenses by 60% compared to VFINX. So, as you know, not all index funds are created equal either. I suspect as I get older and assets continue to accumulate, I'll look at some actively managed funds. Right now, I'm happy plugging along on autopilot!

 

[RunningBum]

Yes, I'm actually in VTSAX. VPMAX (Primecap admiral) is a holdover from when I had a more scattershot approach with a lot of managed funds. I've closed the rest of those into VTSAX and VTIAX (Total International) but I have a very nice profit on VPMAX so I'm not inclined to sell it off especially while it's doing so well.

 

[hnzw_rui]

Roth IRA: Vanguard Target Retirement 2040 (VFORX)

Yup, I'm that lazy. Once I have sufficient funds in the Roth for Admiral shares, though, I'll probably switch to VTSAX, VTIAX and VBTLX.

The 457b is mostly Schwab Index ETFs.

 

[easysurfer]

I selected 85% or higher as not including Wellington for my HSA or Money Market, I'm all in indexes of one class or another.

 

[HFWR]

Many of these index v. active v. something else arguments seem to miss the point.

With low-cost index funds, and buy/hold/rebalance, you get 1) low fees, 2) broad diversification, and 3) a mechanism that requires minimal upkeep, and removes much of the angst of [-]guessing[/-] picking which funds/stocks will "outperform". Nothing magic about it...

 

[NW-Bound]

On another concurrent thread, Fermion mentioned that someone who shorts the S&P via a leveraged bear ETF can still call himself an indexer. His weight relative to the index is simply -3X instead of 1X.

So, shouldn't the poll allow for a number lower than the 0-to-15% bracket? As low as -300%? What if an audacious guy buys the bearish ETF on margin? Or its option?

Oh là là! We can be talking -1000% indexing here. Conversely, one can go +1000% indexing.

 

[Rustic23]

I am an indexer, even between four funds one not an index because USAA did not offer one.

S&P 500
Nasdaq
Total Market
World Fund *non index

Not a lot of money involved, so I just keep it simple.

 

[FUEGO]

90% index funds. The other 10% would be in index funds if there were a significantly cheaper index fund alternative to Vanguard's international value actively managed fund for that slice of my asset allocation (I could save 0.04% by moving to ishares EFV but not worth the trading costs or hassle).

 

[Readyforachange]

I did not think of myself as an indexer, but I just looked and I have 67% in index funds and another 10% in quasi index funds (not technically index funds, but low cost Vanguard funds that very much behave like index funds - VWITX for example).


Sent from my iPad using Early Retirement Forum

 

[RunningBum]

Many of these index v. active v. something else arguments seem to miss the point.

With low-cost index funds, and buy/hold/rebalance, you get 1) low fees, 2) broad diversification, and 3) a mechanism that requires minimal upkeep, and removes much of the angst of [-]guessing[/-] picking which funds/stocks will "outperform". Nothing magic about it...

That's one side of the argument. You seem to miss the point that non-indexers make:

1) Overall returns after fees and taxes are what's most important.
2) You can choose to get broad enough diversification with any plan. Being a little less broadly diversified by trying not to invest in losers is a better strategy.
3) What angst? What you call guessing they would call research. If you can get a 1% better return on a $1M portfolio for a few hours/month work, that's a nice payoff, and some people actually enjoy it, or at least don't hate it.

In disclosure, I'm in the "primarily indexer" category myself so I lean towards your side, but I respect that some people actually can do better fairly consistently. I did during the dotcom boom but not since so I've learned that it works better for me not to try.

 

[HFWR]

That's one side of the argument. You seem to miss the point that non-indexers make:

1) Overall returns after fees and taxes are what's most important.
2) You can choose to get broad enough diversification with any plan. Being a little less broadly diversified by trying not to invest in losers is a better strategy.
3) What angst? What you call guessing they would call research. If you can get a 1% better return on a $1M portfolio for a few hours/month work, that's a nice payoff, and some people actually enjoy it, or at least don't hate it.

In disclosure, I'm in the "primarily indexer" category myself so I lean towards your side, but I respect that some people actually can do better fairly consistently. I did during the dotcom boom but not since so I've learned that it works better for me not to try.

You just made my point, though. I don't argue that my way can't be beaten, but being more "active" would be more w*rk, and cause more angst (for me). I like the set-and-mostly-forget aspect. Plus, there's no guarantee that I could do better... But I don't have any religious fervor about it, say like a Boglehead might.

 

[RunningBum]

You just made my point, though. I don't argue that my way can't be beaten, but being more "active" would be more w*rk, and cause more angst (for me). I like the set-and-mostly-forget aspect. Plus, there's no guarantee that I could do better... But I don't have any religious fervor about it, say like a Boglehead might.

Well, your post before implied (to me, anyway) there were 3 simple points that active investors were missing, but as you say this time, it is an individual choice.

It seems to me that nearly all active investors understand it's not for everyone, and don't have a problem with people who prefer to index. I do, however, see a lot of posts from indexers that say that active investors are being foolish for trying to beat the market. You may not have any religious fervor but your previous post came out that way, to me. You didn't say this was why you are an indexer, instead you said that many were missing those points, as if it were a no-brainer. My reply was that they weren't missing them at all, but that they had counterpoints to each of them.

I wasn't really looking for another round of active vs passive arguments, though I suppose it's inevitable. I was pretty sure that REWahoo's poll wasn't going to tell us much since holding a small amount of a Fido Spartan Index fund in a 401K doesn't make one an indexer, and I wanted to see more granularity to see how diverse we are in strategies.

 

[HFWR]

Didn't mean to be unclear... I don't subscribe to the passive portfolio as being the best way, as some do. I was trying to describe my reasons for holding index funds, and buy/hold/rebalance, and thus my rationalization for it being the best way for me. No religious fervor of any kind here.

I do think there's a fair amount of evidence that many active funds don't consistently beat the "market", but at least some of that involves the funds getting too big, from people chasing performance.

Anyway, for granularity's sake:

HOLDING	%
BIV	10
BSV	24.2
IGR	9.64
VTI	35.27
VGK	5.4
VPL	5.29
CASH	10.16

All index ETFs except for cash. I posted my returns since 2008 on another thread, and though my holdings were slightly different for part of that period, it was still index ETFs.

 

[hnzw_rui]

But I don't have any religious fervor about it, say like a Boglehead might.

I'm an indexer but to be honest, I'm happy that there are plenty of non-indexers. Without them, indexing wouldn't really work all that well.

 

[FedExCourier]

Of my 8 funds, only 3 are managed but about 45% of my cash is in those 3 funds. Wellesley, Primecap and Windsor.

 

[FUEGO]

I'm an indexer but to be honest, I'm happy that there are plenty of non-indexers. Without them, indexing wouldn't really work all that well.

And all of us indexers own plenty of financial firms that benefit greatly from active management fees, account churning, frequent trading, etc.

I'll keep paying 0.0x% for most investments, let Vanguard's computers spin away, and appreciate the charitable contributions to my well being from the benevolence of the active management fans.

 

[MBAustin]

As a result of folks here, I've moved some assets into Wellesley which is managed. Also have a significant amount in taxable funds from monthly investments made back in the 80's ("extra" $$ from LBYM before having kids mostly) - really don't want to take the capital gains hit by selling them. We're probably 60 index/40 active but I didn't go check the spreadsheet before voting.

 

[GTFan]

90% indexed between Vanguard and Fido (in 401k), 10% active at Fido. My actives at Fido have done very well over the years, better than S&P 500. When I got started investing in early 90s the consensus on indexers wasn't as strong so I hedged my bets, I was way more into actives then. But I've also been buy-and-hold no matter what the fund was until a couple of years before retirement, then I cut back on the mix from almost 100% stock to current 60/35/5. Still plan on doing buy/hold/rebalance for as long as I can handle it, I'm totally not into chasing returns when I only need 2.5% WR to live on.

 

[mathjak107]

i used the fidelity insight newsletter since the 1980's with great success.

compared to the s&p 500 it blew it away . the key is just occasionally swapping funds for other funds that better fit the big picture.

it really did not matter if an individual fund beat its index all the time as long as the portfolio working as a team did.

my benchmark was always if i just bought a total market fund how did my total portfolio compare .

but now that i retired it was to cumbersome maintaining two portfolio's since they offered nothing around a 50/50 mix .

the income and capital preservation model was to conservative and the growth and income model was to aggressive.

so rather than run the two which had a lot of over lap in bond funds i created my own model .

i kept two actively managed fidelity funds , blue chip growth and growth and income and all the rest are index funds .

since the day i made the switch i am at a loss so time will tell which is better .

expenses have dropped , no doubt but if performance dropped then it wasn't such a smart move on my behalf . the past had the expenses well worth it.

so now here is the new model

fidelity growth and income fund FDGRX - held this for many many years now .

fidelity blue chip growth FBGRX- had this for many years now

vanguard total market index vti

vanguard extended market index vxf etf

vanguard veu all world index etf

that is the equity side.

the bond side uses

vanguard admiral total bond fund (now only 10% of the portfolio)

fidelity floating rate high yield

vanguard bsv short term bond

vanguard vtip short term inflation proof bond etf