How many active funds beat the SP 500 over the past 8 years?

4   

That's out of more than 7,000 mutual funds.

Remind me again why anyone uses active management?


Source:  http://thereformedbroker.com/2015/05/12/how-many-active-mutual-funds-have-beaten-the-sp-500-in-8-consecutive-years/

Refuting an attack on indexation

Probably the best money management blog out there is Andy Silton's "Meditations on Money Management".  Andy is a retired professional, who although in his earlier days was an active manager, now fully subscribes to the notion that you can't beat the market.

Andy's latest post [ here ] - is a rebuttal to a piece in the New York Times profiling Robert Olstein who is an active manager.  Olstein lives in a world where anecdotes and stories carry more weight than hard facts and data.  This is the world that most active managers live in.   They'll claim that of course, most people can't beat the market, but a few can - and they are part of the chosen few.   They'll point to a few good years of returns and say "see how I beat the market?"

All active manager's have stories and anecdotes about how they can beat the market, and if you believe them, then you'll hand over your cash and pay the 1% management fee.   But if you're smart, you'll index.   In the long run you'll be richer - because of the hard facts of the mathematics of finance.  No anecdotes needed.

Mutual Fund trading costs.

An interesting post from Josh Brown.  What really caught my eye was this:

Trading costs are too high, too. What comes along with lots of trading is lots of trading costs. Scherrer puts the annual cost at around 1.4% (average) to 2.59% for small cap managers, which really takes a chunk out returns.

Remember that when you buy an actively managed fund you are already paying the fund expense ratio which can run 0.5% - 2% depending on the fund.  Add to that 2% trading costs and it is amazing that any of these funds ever beat the market.

A couple on the follies of active management.

First: Andy Silton responds to active managers who challenge his assertion that as a whole, they don't add a lot of value.

Second: The infographic that ate Wall Street.

Andy Silton on Money Management Fees.

Great article in the Sunday paper.  

As an exercise - take the dollar amount of your 401-K and managed retirement assets and try to figure out what fees you are paying.  If, and that's a big if, you can figure this out, think about whether you are getting value for your money.

If you think you are then you are either drinking the Wall Street kool aid, or you are indexing.

Bursting the bubble of investment management riches

An interesting article on the relevance of active management.  

Interesting because it is largely correct in that active management has been shown time and time again to be a loosing endeavor compared to indexing, and interesting because it heavily quotes Ron Elmer, a good friend on mine.

Do active managers earn their fees?

From Gene Fama...the answer, as readers of my blog well know, is no they do not.

Buy and hold - dead or alive?

My colleague, Craig Newmark, has two on the death (or not) of buy and hold investing.

I am clearly in the buy and hold camp.   There isn't really a better alternative unless you have a time machine.

The illusion of superior fund performance

It is well documented that past mutual fund performance is a poor predictor of future performance.

And despite the fact that active mutual funds are all but guaranteed to underperform the average index fund in the long run, people still chase winners.   A nice article in the NYT presents some recent data showing the folly in this strategy.

A simple analogy explains the main point - if I flip a coin 4 times and each time it lands on heads, does this mean that it will land on heads the 5th time because I am a skilled coin flipper?

Dilbert on active management

via Newmark's door.