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Originally Posted by utrecht
I pretty much agree with the indexing crowd, but what if I wanted an emerging markets fund and there was one with a 40 year track record of beating the Emerging markets index? Im not talking about switching to whichever fund beats the emerging market index the past year. im talking about one that has beaten it last year, the last 3 years, the last 5 years..10 years....20 years...ect.
You would still have a problem picking that fund instead of the index fund?
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It would really depends on what you mean by "beating the ... index." If this was in a taxable account, I would be worried about after-tax result where over the long-term it's a higher hurdle to overcome an index fund with low turnover.
But I'll give you an interesting case to me. I have CFICX in my 401(k) so no tax consequences for me and no front-end load for me. It's an intermediate-term bond fund with a ranking of number 1 in 1998, 1999, 2001, and 2003. However, it was ranked 95 in 2000 and 92 in 2002. See this link. It basically looks like an awesome bond fund to have even with it's extremely high turnover rate. Somehow has made only 3% in the last year while vanguard inter-term bond index has made more than 8%. See this link.
The problem is that the bad years hurt you much more than the good years help you. Your particular return will depend heavily on when you buy as well, so you could have a bad year when the fund has a good year.
I've learned that I'm better off in an index fund even when the actively managed fund has good numbers.
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