Comments on: Index Funds, Not Actively Managed Funds

By: A Basic Look at Long Term Investing | Mortgage Info Today Blog

A Basic Look at Long Term Investing | Mortgage Info Today Blog — Wed, 07 Oct 2009 01:26:59 +0000

[...] funds: Because they follow indexes, index funds have no need for active management. This means fees are quite low, and your gains mirror the index [...]

By: Jim

Jim — Tue, 14 Apr 2009 00:01:52 +0000

I think you leave out the main premise (other than low cost) behind advocates of index fund investing– asset allocation. For example a taxable, balanced portfolio might look something like:

Bonds

Vanguard Total Bond ETF (BND) 15%
iBoxx $ Investment Grade Corporate Bond Fund (LQD) 5%
Nuveen Select Tax-Free Portfolio 2 (NXQ) 10%
Nuveen Municiple Value Fund (NUV) 10%

Stocks

Vanguard Total Stock Market Index ETF (VTI) 6%
Vanguard Value ETF (VTV) 6%
Vanguard Small-Cap ETF (VB) 6%
Vanguard Small Cap Value VIPERs (VBR) 6%
Vanguard REIT Index ETF (VNQ)3%
Vanguard FTSE All-World ex-US ETF (VEU) 6%
I-Shares MSCI EAFE Value Index (EFV) 12%
Vanguard FTSE All-World ex-US Small-Cap ETF (VSS) 6%
Vanguard Emerging Markets ETF (VWO) 6%
I-Shares S&P World ex-US Property Index (WPS) 3%

Yes, it’s biased toward value and small cap, but odds are those two areas will out-perform over the long-term. And yes, it contains two non-index, low-cost municipal bond funds to save on taxes.

The more adventurous can add a small portion of gold (GLD or IAU) or a general commodities fund (RJI).

The are some good active funds that have outperformed the market over the long-haul with less risk, but you are dependent on star-managers and often get nasty tax surprises near the end of December.

By: Miranda Marquit

Miranda Marquit — Mon, 13 Apr 2009 20:10:13 +0000

@HIB: You are right that actively managed funds buy and sell more than index funds. This is because a fund manager is active in deciding which stocks to include. An index fund is something most people just invest in on their own because it includes what’s on an index. Only when a stock is removed from an index for some reason is it taken out of an index fund.

@Vered: Great minds…

By: Vered - MomGrind

Vered - MomGrind — Mon, 13 Apr 2009 19:08:12 +0000

I completely agree, with a few rare exceptions.

By: Happiness Is Better

Happiness Is Better — Mon, 13 Apr 2009 14:57:56 +0000

I’m not sure why people invest in actively managed funds. Both index funds and actively managed funds have the influence of people (i.e. the Dow Jones is a FOR profit company and this is what a lot of the index funds are based on). It is my IMPRESSION, I don’t know the numbers, that actively managed funds buy and sell stocks much more actively than index funds.

By: Miranda Marquit

Miranda Marquit — Sun, 12 Apr 2009 01:14:27 +0000

Great quote! I love that one, too. There is no reason to think that you have to do amazing things against the market. To me, it’s all about reaching my personal goals.

By: Index Funds, Not Actively Managed Funds : Yielding Wealth … | Money Blog : 10 Dollars : Money Articles.

Sat, 11 Apr 2009 15:03:57 +0000

[...] See the original post: Index Funds, Not Actively Managed Funds : Yielding Wealth … [...]

By: ObliviousInvestor

ObliviousInvestor — Sat, 11 Apr 2009 13:17:15 +0000

“But for a boring investor like me, big gains aren’t really necessary. All I ask is that I earn enough. And index funds provide me with more than enough.”

Reminds me of one of my favorite Jeremy Siegel quotes, “You don’t have to beat the market to do well in the market.” :)