Index vs managed funds the great war
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BananaRepublic wrote: »My belief is that active funds need not be more volatile, and can markedly outperform the index. Most don’t of course.
That's my belief too....in fact the studies show exactly that. I would definitely be an active investor if I knew which funds would beat their indexes each year.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
bostonerimus wrote: »That's my belief too....in fact the studies show exactly that. I would definitely be an active investor if I knew which funds would beat their indexes each year.
I have found that past performance is a pretty good guide to future performance in the UK, European and Japanese markets.0 -
I took the view, and don't pretend to know everything at all, that if you're investigating g for a 30 year period then index funds have a lower cost and over that kind of time frame while some active fund will undoubtedly best the market average most won't. And I'm not confident to pick which will be which. I figured if I wasn't going to try and buy my own shares directly the market average would be fine for me.
I definitely think active funds have their place in some markets0 -
Funny enough as i get older i have started to look at trackers more or even some of the smart beta ETF's as they also appeal on a time saving benefit.Back in the 70's when i turned 16 like many at that time i had an endowment policy from my parents payout what seemed like a good sum for a small monthly payment to the man from Liv & Vic(or Pru).This got me interested in saving and i heard about a monthly plan with F&C so started that.Over the years that and other active funds i joined did well (as best i could tell with less info in them days for DIY)And with some of the IT's i have i can see no reason to ditch and the likes of City of London,Scottish Mortgage,F&C & Witan etc are not even that expensiveValiantSon wrote: »The policemen look like they haven't started shaving; I can't name you a single artist in the charts; I still buy CDs - and call them records; and tut about the youth of today. Now I have to add something else to the list of things that make me an "older" person.
Sorry, not much help to you, but I feel so very old now. Best go and make a cup of cocoa and go to bed.... if my old bones will get me there.
But what i have found and started with my company pension is that if my fund choice's started to do bad i have become more likely to pick a passive or add to the ones i had rather then do the work to find the next big thing only to see the original choice rebound and go past the new choice: (But i still look active for somethings such as bonds as i think a manager can add value.)
What ever your age - if new to investing i would read up first as there is more info now then ever before or take up the offer of a first meeting with an IFA(may even be free) I would then make at least one active fund choice to give some interest and learning curve in investing as even going passive it would be good to understand markets,dividends,yield etc.As just doing set and forget with a passive investment can come with a shock if you don't understand.One of the good things for trackers is they have been around in pretty much stable times but have not faced a 70's recession or a long down turn so may come as a shock to some.
So young or old no passive/active war but hopefully a mix of both0 -
EDIT: I am 28 years old and write this with the awareness that index funds are better suited to older investors as if diversified they are perceived to be lower in risk.
It's nothing to do with age. And remember risk isn't one thing. There are different risks. For example, the risk of losing everything, if you put your money in one stock. Or the risk of markets tanking the day you need to take money out (you mitigate this risk by having an emergency fund or cash cushion).
It's not safe to think index funds are 'less risky' than active funds, although you can argue active investing introduces the extra risk of underperforming the index, if there is one.0 -
bostonerimus wrote: »That's my belief too....in fact the studies show exactly that. I would definitely be an active investor if I knew which funds would beat their indexes each year.
You dont need to know which funds will beat their indexes. You need a large enough portfolio to hold a non trivial amount in each of a broad range of funds. Some will beat their index and some wont. You can easily rule out any no-hopers and presumably have a better than average chance with the rest.
Most actively managed funds wont match their index (should they have one) because they dont invest in their index. And those that do are the closet trackers which are pointless and can be ignored. Active funds not investing in their index is the fundamental reason one may wish to buy them. Asset allocation is far more important than the odd fraction of a % in charges - if one wants to invest in the index buy the index, otherwise otherwise.0 -
Remember John Bogle is American and is writing for a US audience.
The tax treatment by the IRS of each internal sale by a US domiciled fund is different to the way in which a UK domiciled fund is treated by HMRC which makes "trading" costly hence a reasonably static Tracker fund / ETF has an advantage.
I have both Active & Passive funds and try to avoid being dogmatic as they both have a role and a function that works in different markets and different situations.
The great advantage of a Tracker is it is so easy, and is less daunting for those starting out in investing. Analysing and comparing active funds needs more effort if it is to be done well, it also needs to be more closely monitored over time.
With a diversified set of trackers you could just Fire & Forget for 10/20/30 years and you woudl have achieved whatever that market achieved (less costs).0 -
There are some good recommendations there and I struggle to see how, having read them, that you can conclude that passives are better suited to older investors. I am pretty confident that none of them have actually stated that. How do you explain your decision, as a younger person, to use them yourself? Anyway my day won't be improved by another pointless active/passive, salt/pepper bun fight so I'm outDo you have any recommendations? So far have been doing online research/bought a few books and checking out YouTube as well. If you have any suggestions that would be appreciated. I have already had a look at the previous book thread on here, so no need to flag that up.0 -
BananaRepublic wrote: »Note that many markets and sectors do not have index funds, so if you want exposure to them, active is the only choice.
Which sectors and markets don't have index funds?0 -
Remember John Bogle is American and is writing for a US audience.
The tax treatment by the IRS of each internal sale by a US domiciled fund is different to the way in which a UK domiciled fund is treated by HMRC which makes "trading" costly hence a reasonably static Tracker fund / ETF has an advantage.
True if held outside of tax advantages accounts.....most people will have their money in things like SIPPs and ISAs so it's not an issue.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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