Barron’s article has a strange title for this investor who prefers no active fund manager! Click here
Here is my comment after reading Barron’s article.
“High active share is no guarantee that a fund will outperform, but it is likely a necessary condition,” he says. “You can’t beat the index if you look exactly like it.”
Nowhere in this article did the authors mention which index: S&P, International, Emerging Markets, Mid-cap, Small-cap, Global are the major indices. They also failed to mention which fund should investors choose going forward? If they can pick a fund that will beat the market going forward, heck I’ll bet the farm on it. My guess, based on the returns in their chart, that its Dodge and Cox stock. So now am I supposed to invest in that fund? But in the last sentence says, there are “no guarantees.” Darn!
What is wrong with earning the market averages? I’ll try to answer that question, nothing! I’ll take between 7-8% over long periods of time, anytime. The goal is not to beat the index. I’ll take a guess that Barrons was picking on that frequently picked on S&P 500–what a bashing this great index has taken in the last 13 years.
Never invest all of your money in the S&P 500 index. We all know this, but these types of articles almost always compare what they want to sell you as beating the S&P 500 index.
The goal is for your money to keep pace with inflation with a broadly diversified around the world equity exposure with the major indices mentioned above with a bond allocation roughly equal to one’s age. This goal lowers risk and turnover expenses.