Index Mutual Funds
#1
Cruisin'
Thread Starter
Index Mutual Funds
Anyone have experienced with index mutual funds? Was thinking about putting some money into index mutual funds with a low MER in a TFSA since I'm in no rush to use that cash.
#2
Drifting
In general index funds are slightly lower in performance than other funds, but they are also lower risk overall. Depending on the amount you're looking to invest, I'd probably go with a few different funds as well as an index fund. Make sure you check all of the fees out before investing in any of them since some are much higher than others which will eat away at your returns.
#4
Safety Car
In general index funds are slightly lower in performance than other funds, but they are also lower risk overall. Depending on the amount you're looking to invest, I'd probably go with a few different funds as well as an index fund. Make sure you check all of the fees out before investing in any of them since some are much higher than others which will eat away at your returns.
I'm a firm believer in Jack Bogle, Warren Buffett, and David Swenson. I invest for the long-term, in low cost index funds that gives a fair share of market returns to the investor. I don't pretend to know who the next Peter Lynch is. I sleep well knowing my money will be there for me during retirement.
Do professionals outperform the market? The data still says no.
Mutual fund investors must make the decision to pay to have their money actively managed by a professional or to passively invest in the market index at a lower cost. Past academic studies have indicated that professional investors are not worth the cost because the after-fee return is lower than that of the market index. Theoretically, active managers as a group will have a hard time outperforming the market over the long-run because professional investors are a large portion of the market and once fees are netted out, they are likely to underperform a passive index.
Despite the academic theory, investors have continued to pay for active asset management, preferring to try to pick a winner rather than playing it safe. As of December 31, 2012 there was over $7 trillion invested in over 23,000 actively managed mutual funds and ETFs, almost three times the $2.5 trillion invested in passive funds. Could this many people really be wrong?
NerdWallet investigated by examining the actual outcomes over the past decade of investing with active versus passive management. The study looked at more than 24,000 mutual funds and ETFs available to U.S. investors for the ten-year period ending on December 31, 2012. Of these, only 7,943 were in existence for the full ten years.
The asset-weighted average return of the actively managed mutual funds over this period was 6.50% while the passively managed index products averaged 7.30%. Similarly, for equity funds the average return was 7.19% for active managers and 7.65% for passive funds. Index funds outperformed actively managed funds regardless of whether returns were measured by asset-weighted average, median, or a simple average.
Mutual fund investors must make the decision to pay to have their money actively managed by a professional or to passively invest in the market index at a lower cost. Past academic studies have indicated that professional investors are not worth the cost because the after-fee return is lower than that of the market index. Theoretically, active managers as a group will have a hard time outperforming the market over the long-run because professional investors are a large portion of the market and once fees are netted out, they are likely to underperform a passive index.
Despite the academic theory, investors have continued to pay for active asset management, preferring to try to pick a winner rather than playing it safe. As of December 31, 2012 there was over $7 trillion invested in over 23,000 actively managed mutual funds and ETFs, almost three times the $2.5 trillion invested in passive funds. Could this many people really be wrong?
NerdWallet investigated by examining the actual outcomes over the past decade of investing with active versus passive management. The study looked at more than 24,000 mutual funds and ETFs available to U.S. investors for the ten-year period ending on December 31, 2012. Of these, only 7,943 were in existence for the full ten years.
The asset-weighted average return of the actively managed mutual funds over this period was 6.50% while the passively managed index products averaged 7.30%. Similarly, for equity funds the average return was 7.19% for active managers and 7.65% for passive funds. Index funds outperformed actively managed funds regardless of whether returns were measured by asset-weighted average, median, or a simple average.
#6
Safety Car
http://financials.morningstar.com/fu...&culture=en-US
That's probably too expensive of a fund for me. I'm doing Vanguard Total Stock market (basically 100% US domestic right now) for now, no front-load, low-cost mutual fund with passive management. 0% front load at an ER of 0.05%. Tracks the entire publically traded US economy. Getting my fair share and minimizing any extraneous costs so as to maximize after-fee returns over the long haul.
Also that AMRMX is invest in 15% other "misc" things looks like cash and some foreign stocks. Bit complicated for me. I like to keep my portfolio simple. I'll need to start dial down my equity allocation (currently at 100% US domestic) and get into bonds and also diversify my stock holdings to include international stocks as well.
Last edited by nist7; 09-27-2014 at 11:55 PM.
#7
Team Owner
My go to fund is VFIAX. Want to spice it up a bit? VIMAX
For my 401k I have some a Fidelity Total Market something or other. It's been pretty good. The Vanguard funds aren't offered in my 401k
It will be interesting to see if these funds can keep performing since the market is at all time high. Guess we get a pullback soon.
For my 401k I have some a Fidelity Total Market something or other. It's been pretty good. The Vanguard funds aren't offered in my 401k
It will be interesting to see if these funds can keep performing since the market is at all time high. Guess we get a pullback soon.
Last edited by doopstr; 09-28-2014 at 09:34 AM.
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#8
Safety Car
My go to fund is VFIAX. Want to spice it up a bit? VIMAX
For my 401k I have some a Fidelity Total Market something or other. It's been pretty good. The Vanguard funds aren't offered in my 401k
It will be interesting to see if these funds can keep performing since the market is at all time high. Guess we get a pullback soon.
For my 401k I have some a Fidelity Total Market something or other. It's been pretty good. The Vanguard funds aren't offered in my 401k
It will be interesting to see if these funds can keep performing since the market is at all time high. Guess we get a pullback soon.
In fact a recent study of wall st active funds showed that the 2 highest returning funds that consistently beat the market in the last 10 years were two value stock funds, IIRC. I'll have to pull up that news article/study.
Yeah I'm lucky in that my 403(b) (basically 401k for public institutions since I work for an university) has access to nice vanguard funds. ANd of course I am maxing out my roth IRA this year as well with vanguard.
But yes, the market has been on a pretty big bull run with 2013 returning a whopping 30%!
Looks like YTD in 2014 the market has returned 8% so far: Index Returns
Which looks like will cool off compared to 2013 but still more than the rough average of the 7% thrown around many times.
Of course this is nominal returns, not accounting for inflation.
When the Fed finally raises the rates we will see how spooked Wall St gets. But I am not worried since I am in this for the long haul for 30+ years.
When the market does drop again or has another big crash like in 2000/2008, I will be eager to buy up as much as possible to cash in on the equity fire sale.
#9
Safety Car
#10
Safety Car
hah, thanks.
Yeah too many times the old mantra of "buy low sell high" is repeated but in real life people are not going to be easily able to ACTUALLY buy low and then sell high.
Besides when 2000/2008 happened, who was actually contributing MORE into their mutual funds?
And right now when we are in a huge bull market run, who is shying away from the stocks?
It's the nature of human mind and the recency bias. A Fidelity rep I spoke to (they administer my university's 403b plan) says he was talking to a 60yo+ lady who lost 50% of her retirement portfolio in 2008. Turns out her entire retirement portfolio was an SP500 index fund (I guess you could do worse but the asset allocation is extremely high risk for someone in that age group) and so instead of selling out at that low point he convinced her to stay in and now it's all back and more.
Yeah too many times the old mantra of "buy low sell high" is repeated but in real life people are not going to be easily able to ACTUALLY buy low and then sell high.
Besides when 2000/2008 happened, who was actually contributing MORE into their mutual funds?
And right now when we are in a huge bull market run, who is shying away from the stocks?
It's the nature of human mind and the recency bias. A Fidelity rep I spoke to (they administer my university's 403b plan) says he was talking to a 60yo+ lady who lost 50% of her retirement portfolio in 2008. Turns out her entire retirement portfolio was an SP500 index fund (I guess you could do worse but the asset allocation is extremely high risk for someone in that age group) and so instead of selling out at that low point he convinced her to stay in and now it's all back and more.
#11
08 TL type-S
Nist, I also invest in the VTSAX, vanguard total stock market index fund. I have no crystal ball, neither does anybody else, so total market is where I stay. Of course, I am balanced 70/30. 30% is VBTLX - Vanguard total bond index fund.
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