Not sure if this was discussed here before but a recent article in the WSJ shows that 82% of actively managed US mutual funds trailed index funds for the last 15 years.
http://www.early-retirement.org/forums/newreply.php?do=newreply&noquote=1&p=1868196
You may need a subscription to access the article. For those who are unable to access the article try these two links:
http://online.wsj.com/public/resources/documents/print/WSJ_-A001-20170413.pdf
http://online.wsj.com/public/resources/documents/print/WSJ_-A008-20170413.pdf
From the article:
"Over the 15 years ended in December 2016, 82% of all U.S. funds trailed their respective benchmarks, according to the latest S&P Indices Versus Active funds scorecard. This was the first year that the analysis included 15 years of data, helping smooth out periods of volatility that can affect the performance of active managers."
many times just using a pretty cheap newsletter is all it takes to get very good performance , hand holding and guidance .
i have always used managed funds over most of my investor life but in a dynamic portfolio using the fidelity insight newsletter . . it never mattered to me how funds did year to year as all the funds i have used have sweet spots where the big picture is obviously better at times than others for them .
while fund managers have to stick to the funds bylaws and objectives day in and day out i do not and can tilt a portfolio slightly one way or another .
so it is easy for the sum of the parts to do better than any fund individually does . you do not even have to be right all the time . just being right more than wrong pays off .
so the performance is extracted when the bigger picture favors a particular fund's weighting when it has its day in the sun and when the big picture changes the fund is swapped .
as an example , last year about 20% of my portfolio was in high yield . it was a no brainier the way markets priced the high yield market like 1/2 of the bonds were going to default . it just made little sense . so there was a pretty good value there that ended up producing better than 16% returns yet had a beta of almost 1/2 the s&p 500 .
today the spread between quality and high yield is to the point it is no longer worth owning those funds anymore so they are swapped .
a high yield fund has to stay in high yield but i as an investor we do not and that makes a big difference in portfolio outcomes vs just performance on individual funds year over year .
another example might be small cap value has had a huge run up , today it is a good idea to scale back or even move to other areas of the market as the risk is likely greater than the reward may be , but even if you scale back and are wrong it will not hurt things much as it is only one fund in a portfolio that is swapped .
most of the fidelity and vanguard newsletters that utilize their funds have very good track records over the long term and they all do just that .
i use fidelity insight's newsletter and have been using it since 1987 with excellent results from managed funds .
a 100k investment when i started in the growth model is over 2.3 million today eclipsing the s&p 500 by just over 470k including those slightly higher expenses on fidelity managed funds .. just look at the difference in performance between fidelity's managed total bond fund vs vanguards unmanaged index , it is night and day over every time frame .
i can put portfolio's together in my sleep yet i use the the newsletter for many reasons .
i do it because i am never happy at being average at anything so left to my own devices i am always plotting my next move and 2nd guessing the last one trying to outsmart things .
i do it because i devote all of 30 seconds a week reading an update on friday's . usually funds stay in place for quite a while but when they outlived their usefulness they are swapped .
it makes it very simple for my wife to handle things if i am not here .
so performance has been good , the fact i don't have to think about things is good and the portfolio is nicely balanced because you can buy even index funds and end up with so much stock over lap without knowing just what is held .
it can be bad in index funds when putting different ones together and it gets worse buying managed funds where you can get lots of over lap from the same fund family .
40% of our assets are in index and etf funds in the golden butterfly which can react upward even in a stock plunge , the rest are in the fidelity insight models which i have followed for 30 years . are the models the winner every year ? nope . they just have to be more right than wrong and evidently that has not been hard to do at all over the decades .
so there is a big difference between a fund manager being locked in to the funds rules and objectives vs how you do as an investor when utilizing those funds in a comprehensive portfolio and the funds interact with each other and are not bound by rules and bylaws nor are you required to sit with the fund when the big picture changes for that fund . .
the insight growth model has averaged almost 11% cagr the last 30 years vs a bit over 10 for the s&p 500. that extra 1% which is after the slightly higher expenses grew a whole lot more money over the long term and the important thing is for most of it the beta was lower than the s&p 500..
