Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Some Active beats Indexing
Old 03-30-2016, 11:14 AM   #1
Full time employment: Posting here.
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 927
Some Active beats Indexing

American Funds says low fees, manager ownership can save actively managed funds

"On a ten year monthly rolling return, American Funds beat the large cap index 100% of the time."

Article says that funds with low expenses and high management ownership beat indexing.

Nice to see as I've owned select American Funds for 30+ years.
__________________

__________________
In theory, there's no difference between theory and practice. In practice, there is. YB
gcgang is online now   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 03-30-2016, 11:21 AM   #2
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
The key word being "some" here.

If you take the ~10,000 or so mutual funds over time some small percentage will inevitably have great performance. If you sell your index fund and invest in this fund will you be better off some decades out ?


Can they do it for 30 years straight ? Is past prologue ?
__________________

__________________
MasterBlaster is offline   Reply With Quote
Old 03-30-2016, 11:28 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by MasterBlaster View Post
The key word being "some" here.

If you take the ~10,000 or so mutual funds over time some small percentage will inevitably have great performance. If you sell your index fund and invest in this fund will you be better off some decades out ?


Can they do it for 30 years straight ? Is past prologue ?
Yup. And survivorship bias plays a roll too. "Excluding the funds we closed because of poor performance, our performance was great!"
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-30-2016, 11:35 AM   #4
Thinks s/he gets paid by the post
 
Join Date: Jan 2008
Posts: 1,495
Ugh. No. It doesn't. There are seemingly infinite studies that prove otherwise.
__________________
Options is offline   Reply With Quote
Old 03-30-2016, 11:44 AM   #5
Thinks s/he gets paid by the post
 
Join Date: Mar 2011
Posts: 3,705
Serious question, not a challenge: are we saying that it's hard to beat index funds and that active management is a waste of time/money?
__________________
Living well is the best revenge!
Retired @ 52 in 2005
marko is online now   Reply With Quote
Old 03-30-2016, 11:51 AM   #6
Full time employment: Posting here.
dixonge's Avatar
 
Join Date: Mar 2008
Location: Ajijic
Posts: 848
There is a reason Vanguard is killing it...

Vanguard's Gain Is Wall Street's Pain as Billions Leave the Financial Industry - Bloomberg
__________________
dixonge is offline   Reply With Quote
Old 03-30-2016, 12:05 PM   #7
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by marko View Post
Serious question, not a challenge: are we saying that it's hard to beat index funds and that active management is a waste of time/money?
I think it's hard enough to do, and risky enough to try, that most people are just better off indexing. A fund may outperform for a few years, and usually that's when too much "hot money" chases it, the managers can't invest it as well, and the underperformance begins. (Most funds in this situation close too late, if at all.)

I believe it is possible to beat the market regularly. The problem is that many people think they will be the among the few who can. And usually, they lag the market. And the larger the fund, the harder it is to beat the index. Individual investors can do it, but again, to me it's not worth the risk of underperformance.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-30-2016, 12:14 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,282
I don't feel like creating an account to read this one article, but as G4G points out - did they account for survivorship bias? That is one of several little 'tricks' used.

You need to start with the funds offered at the beginning of the time period you are analyzing. Not with the ones at the end, and look backwards.

So maybe some managers have been able to provide consistently better returns (seems like Wellesley and Windsor do it in their classes), but is it enough to risk they can continue?

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 03-30-2016, 12:49 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Apr 2013
Posts: 5,581
American funds has some good active funds but most find the 6% FE load intolerable.

It doesn't surprise me that they would find some data to prove they're(American funds) are better than indexing. I assume their Sr. management is concerned about their future. Many of the assets in AFS went to Vanguard during the financial crisis, now the DOJ wants the advisors to be fiduciaries. Kind of a kick in the teeth. Wonder if buggy whip makers made up studies about horseless carriages.
__________________
MRG is online now   Reply With Quote
Old 03-30-2016, 03:38 PM   #10
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 1,723
After 35 years of personal investing experience, and lots of different strategies, including self and professionally guided, I am now highly indexed. Whenever I make a change, it is toward more index and minimum fees.
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote
Old 03-30-2016, 03:38 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,619
I like how they characterize their high expense ratios as low expense ratios. I think they learned a lesson from a popular presidential candidate.
__________________
LOL! is offline   Reply With Quote
Old 03-30-2016, 03:53 PM   #12
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
braumeister's Avatar
 
Join Date: Feb 2010
Location: Northern Kentucky
Posts: 8,606
Quote:
Originally Posted by DrRoy View Post
After 35 years of personal investing experience, and lots of different strategies, including self and professionally guided, I am now highly indexed. Whenever I make a change, it is toward more index and minimum fees.
I'm generally the same, but only about a third of my portfolio is actually indexed. Still, my overall ER is just 0.16% so that's not bad.
__________________
braumeister is online now   Reply With Quote
Old 03-30-2016, 05:50 PM   #13
Full time employment: Posting here.
Markola's Avatar
 
Join Date: Nov 2013
Posts: 545
Quote:
Originally Posted by marko View Post
Serious question, not a challenge: are we saying that it's hard to beat index funds and that active management is a waste of time/money?

Yes.

http://mobile.nytimes.com/2015/03/15....html?referer=
__________________
Markola is offline   Reply With Quote
Old 03-31-2016, 06:51 AM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,644
DW has an old zombie IRA with American Funds that I haven't gotten around to transferring to Vanguard (some PITA with gold certifications or something). Nice to see that she happened to be in a decent place. I still plan to transfer it one of these days.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 03-31-2016, 08:26 AM   #15
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,836
It's an truism that "some Active funds will beat Indexing"....knowing which funds is the trick.
__________________
“So we beat on, boats against the current, borne back ceaselessly into the past.”

Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 03-31-2016, 08:55 AM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,891
Quote:
Originally Posted by nun View Post
It's an truism that "some Active funds will beat Indexing"....knowing which funds in advance is the trick.
FIFY
__________________
Yes, I have achieved work / life balance.
travelover is online now   Reply With Quote
Old 03-31-2016, 10:03 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 19,423
No fund can beat the index market every single year. And indeed many fund managers are on a hot streak of only a few good years, then flop spectacularly.

That said, the late legendary John Templeton 50-year track record (1954-2004) is 13.8% annualized return, compared to 11.1% for the S&P. Over those 50 years, a $1 invested in the S&P grew to $193, while Templeton returned $641. That's a factor of 3.8X.

And I am sure that Templeton does not beat the market every single year either. Neither does Buffett. It's impossible to beat the market when it was going nuts with dot-com mania and subprime loans. Do you go on margin to beat it?

So, are these MF managers as good as the above investors? It's a question one has to answer himself.
__________________
"Old age is the most unexpected of all things that can happen to a man" -- Leon Trotsky
NW-Bound is offline   Reply With Quote
Old 03-31-2016, 12:43 PM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,385
Quote:
Originally Posted by NW-Bound View Post

And I am sure that Templeton does not beat the market every single year either.
Especially from the grave. I think his internet access is probably poor.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 03-31-2016, 12:47 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by haha View Post
Especially from the grave. I think his internet access is probably poor.

Ha
Screw that. If they don't have kick-ass WIFI in the afterlife I'm not going.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Some Active beats Indexing
Old 03-31-2016, 04:16 PM   #20
gone traveling
 
Join Date: Oct 2007
Posts: 1,135
Some Active beats Indexing

Quote:
Originally Posted by DrRoy View Post
After 35 years of personal investing experience, and lots of different strategies, including self and professionally guided, I am now highly indexed. Whenever I make a change, it is toward more index and minimum fees.

+1. Aside the Vegas account, it's all indexing for me too. And I wish I had done it 25 years ago when I started investing !
__________________

__________________
papadad111 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
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
Active and an IFA beats passive, the reasons why. nun FIRE and Money 0 12-11-2014 06:43 PM
Indexing or Active approach? sox2012 FIRE and Money 49 10-16-2012 09:36 PM
Alternatives to indexing (alternatives to cap weighted indexing) jIMOh FIRE and Money 7 08-31-2010 09:52 PM
Buffett beats his own Berkshire Hathaway performance Nords Stock Picking and Market Strategy 8 11-21-2007 02:37 PM
Burns~ Indexing is flawed, vain, violent...better get some. mickeyd FIRE and Money 4 01-15-2007 07:21 PM

 

 
All times are GMT -6. The time now is 12:24 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.