Index Funds out perform Mutual Funds 82% to 90% of the time

[Quixote1818]

This is a great way to stick it to Wall Street. Invest in index funds! Not only are statistics on your side to make more money over the long period you won't be lining the pockets of the A-Holes on Wall Street. At least not as much.

Snip:

A new white paper by Portfolio Solutions and Betterment, "The Case For Index Fund Portfolios," pretty much solidifies all we've ever known or guessed about low-cost, passively managed index funds –– they can rarely be beaten.

Looking at advanced portfolios holding 10 asset classes between 1997 and 2012, researchers found index fund portfolios outperformed comparable actively managed portfolios a staggering 82% to 90% of the time. And the longer investors held those investments, the better shot they had at outperforming active funds over time.

Still not convinced? Even lowering the cost of actively managed fund portfolios couldn't offer a boost significant enough to outperform index funds, the researchers found.

“The outcome of this study statistically favors an all-index fund strategy, all the time," the report says. "The probability of out performance using the simplest index fund portfolio started in the 80th percentile and increased over time and with additional asset classes. These results have significant and practical implications for investors who seek a strategy that can give them the highest chance of reaching their investment goals.”


Read more: http://www.businessinsider.com/index-funds-beat-actively-managed-funds-2013-6#ixzz2vVnUMdQX

Snip:

Index funds put you in very good company. Index funds are favored by Nobel Prize winning economists, Warren Buffett, John Bogle, Charles Schwab, almost all academics, the largest U.S. pension funds, and almost every fiduciary adviser.



http://www.marketwatch.com/story/13-reasons-index-mutual-funds-and-etfs-rule-2013-07-24

[Squinch]

1. Also, make sure you are with a company that charges minimum fees. Makes a big difference

in the long run.

[muriel_volestrangler]

2. True in the US, but not in all markets

The research looked at the overall return over the past five years. In the UK, there was a 66pc chance of beating the average tracker return. Those funds that did best bought smaller company shares – the most money was made by Fidelity's UK Smaller Companies fund, which grow by 224pc, turning £10,000 into £32,400. It achieved this by investing a larger proportion of money in stocks such as Speedy Hire, the tool rental firm, which accounts for £2.80 of every £100 invested in the fund, and Aim-listed Origin Enterprises, which supplies fertilisers to Irish farmers and accounts for £3.20.
...
In America, the case for using a passive fund was far more compelling, rplan found. This is because the US stock market is dominated by major firms such as Apple and Microsoft – and it's hard for fund managers to find an edge. A hefty 61pc of active fund managers failed to beat the average return of 74pc over the five-year period. The story was similar with global funds, where only 44pc of managers beat the average passive fund, which grew by 24pc.

But in emerging markets, active fund managers fared far better. Overall, there was a 74pc chance of an active fund manager beating the average passive fund. In Europe the figure rose to 99pc.

In Japan, the figure dipped to 73pc of active fund managers who clocked up better than the 19pc average return. The funds that excelled – such as the Legg Mason Japan Equity fund (up by 165.7pc) and Baillie Gifford Shin Nippon investment trust (121.5pc higher) – focused on smaller companies.

http://www.telegraph.co.uk/finance/personalfinance/investing/10402153/Where-do-human-fund-managers-beat-computers.html

Their theory is that in markets where large firms are doing well, index trackers will do well; where established firms are struggling, active stock choosing does better.

[Quixote1818]

4. Great info! Thanks. nt

[brooklynite]

3. Just to be clear, Index funds -ARE- Mutual funds...

It's just that the share purchased are from companies in the requisite Index.