These days, the passive investing movement is gaining momentum faster than I get rejected for dates by attractive ladies. And for good reason. Actively managed mutual funds may sometimes outperform the index, but are more often than not surpassed by their passive brethren. Math would indicate that the average fund would match the overall stock market, since mutual funds are such large participants. And this is true, except for one little caveat: fund fees. The fees cover all sorts of things – like paying the advisor who sold the fund to the investor, as well as paying the fund manager and the fund’s expenses. The fees also include advertising to expand the mutual fund, as well as ensuring the mutual fund company makes a healthy profit. Read More…
2012-02-05
With the advent of options such as low-cost ETFs and that studies show that actively managed have no better chance of beating the market than monkeys making the picks i have never chosen a mutual fund that is advertised as Actively Managed. I shutter at the thought.
I think over time more people will see the disadvantages of them and start moving towards indexing. But it is a sad truth that marketing plays a big influence.
They tout passive investing because it works! The sad reality though is Canadians aren’t fully educated on the fact and so look to mutual funds to take their worries away with the irony being that more worries will insue.
The scary thought is when people start buying active funds and placing them into their RRSPs. Yikes! Over time all their gains will likely be eaten by the fees.
I say just put your money into a well and good index fund such as SPY and be done with it. Low fees and you are guaranteed returns over the long term. End of story.
Yes marketing is the big reason why they will never go away.
They still have mutual funds like that? huh?
Fees on actively managed are rediculous. All you need to do is check performances over a 5 year period and you will see virtually all of them are lame at best.
The wealthiest people in the world are fund managers. And the crazy thing is most end up being wrong. But leave it to human greed hoping to beat the odds.