use Active Management or a Tracker Fund

Lungboy

I've been reading that bonds are better off being actively managed, would you agree with that?

jsinc

dunstonh wrote: »

That is not what I asked.

You said "Broad asset allocation may trump fees, but fees trump specific fund or index selection imo."

That is putting the selection of the investments based on cost first and where to invest second. That is not the correct way to do it. Cost should always be secondary to where you invest.

I certainly understand your reasons for not selecting managed if you feel you are not up to it. That is logical and common sense. Managed does take more work and understanding. But even then, cost should be secondary. Some of the lowest cost trackers perform worse than slightly higher cost ones.

I'm not sure I agree. I don't really believe anyone has the ex ante ability to consistently and cost-effectively net outperform a broader market.

But I may be disagreeing in terms of relative scope rather than absolutely. For example my highlighted sentence doesn't mean I wouldn't consider historical market performance or valuation, then also compare factors like tracking error, currency exposure, potential profit share - other known cost inputs in relative future returns.

pip895

Lungboy wrote: »

I've been reading that bonds are better off being actively managed, would you agree with that?

It makes sense to me - an active manager can avoid companies which are over indebted but the passives have to practically overweight them.

bostonerimus

The active managers could have chosen the best-performing shares from the S&P500, which is what active managers are supposed to do, and then they would have won!

There were surely active managers and hedge funds that beat the S&P 500 in the period of Buffet's challenge and would have won the bet. That's not to say that the managers in the test were necessarily poor, they just made bad choices or their algorithms gave them bad results. The trick is to pick the winners. If you have doubts about doing that then being average in a well designed tracker portfolio is a better bet. Over the last 30 years a 60/40 US cap weighted portfolio has returned 9%......in $ no currency hedging...........and that's a nice annual return, not as much as some portfolios, but better than many. Back in 1987 I decided to use a pretty simple tracker portfolio with annual rebalancing and I've averaged 8.5% annual return which should be more than enough for most financial plans.

Filo25

dunstonh wrote: »

He won but he also got lucky in timing. He picked S&P500 during a period when S&P500 outperformed everything. Had the same selection taken place a decade earlier, when it signficantly underperformed he would likely have lost.

Which does go towards the argument that the most important thing of all is asset allocation

He also made an active decision in terms of which index/market to track.;)

VLS100 would probably be the most commonly used pure equity tracker on here I would guess and its had a dismal year (it is one of the passives I benchmark against),

Agree with other comments though, though unless you want to invest the time, going diversified passive would be the way I would go

TBC15

If you take CPI into consideration VLS 100 and VLS 80 are both in negative territory over the last year, -1.2% and -1.3%.