Author Topic: Are active funds so bad?  (Read 1620 times)

Asgard01

  • Stubble
  • **
  • Posts: 137
  • Age: 37
  • Location: England
Are active funds so bad?
« on: June 12, 2014, 01:02:45 PM »
Hi all,

I was curious as to whether there are many people on here that actually prefer active funds to passive or at least include them in their portfolios. Passive seems to be touted by so many people in books/blogs and forums but is it too quick and easy to dismiss active?

I am debating with myself whether I am missing out on anything with sticking to a vanguard life strategy 60% accumulation fund over including some active funds. Are they really that bad? Would be interesting to see if any of you do use them and for those that don't, what's the main reasons for that?

Chris

ivyhedge

  • Bristles
  • ***
  • Posts: 290
  • Location: United States of Farse
Re: Are active funds so bad?
« Reply #1 on: June 12, 2014, 01:09:45 PM »
I'm an active manager by employ, so folks assume that impels me to recommend such action. There are some active managers I know and use: without reservation, because I know they represent the pinnacle of management in their (generally) very specific sub class.


But most of our net worth is in standard index, or fundamental index, funds because, well, it's easier. And everyone's fallible. ;)

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5327
Re: Are active funds so bad?
« Reply #2 on: June 12, 2014, 02:20:24 PM »
There is some evidence that good active management has value, especially in areas of the market that are not easy to understand, unlike slow moving large cap companies.  Small cap, some sectors, small cap international, and emerging market funds, where research can weed out a lot of the dogs that would be in an index fund are areas where management can create an advantage.  I read in an article mentioned somewhere in another thread that actively managed funds can be divided into three segments, index huggers, sector rotators, and stock pickers.  Index huggers generally underperform the indexes because of costs.  Sector rotators have to guess the direction of the market correctly, and that does not always work well.  Alpha may be found among some of the better stock pickers, or so the theory goes.

I use a mix of active and indexed funds.  The bulk of managed funds are not worth the cost.  When you run a comparison of funds over a long time and see a significant positive divergence of the managed fund from the pertinent index, it's worth having a look at.

 

Wow, a phone plan for fifteen bucks!