Author Topic: Explain this to me, please: actively managed funds vs index funds  (Read 220 times)

Bernard

  • Stubble
  • **
  • Posts: 248
  • Age: 62
  • Location: Ojai Valley, Calif.
When I transitioned from individual stocks to mutual funds, I first followed Dave Ramsey's advice and bought what I though is the best of the best actively managed funds, primarily sourced via a long record of beating the market.

I bought:

FSPTX
PRGFX
TRBCX

Then I transitioned to low-cost index funds, and bought:

VGT
VOO
VTI

I observe the market via my iPhone app,  and these funds make totally different movements.
For example, here's today's movement:

FSPTX => 5.57% UP!
PRGFX => 4.50% UP!
TRVCX => 4.17% UP!

VGT =>    3.87% DOWN
VOO =>    5.28% DOWN
VTI  =>    6.08% DOWN

The only explanation I have is that actively managed mutual funds can take advantage of the extreme volatility and thus make money when others can't.
Am I right or am I wrong?

dandarc

  • Magnum Stache
  • ******
  • Posts: 3979
  • Age: 37
Re: Explain this to me, please: actively managed funds vs index funds
« Reply #1 on: March 18, 2020, 02:09:37 PM »
Your mutual funds are still showing yesterday's results.

That's a fundamental change you made - from mutual funds which tally everything up and post a new price after market close. To ETF's which trade and change price throughout the day.

Example - Google FSPTX and it even says "Mar 17" under the price.

dandarc

  • Magnum Stache
  • ******
  • Posts: 3979
  • Age: 37
Re: Explain this to me, please: actively managed funds vs index funds
« Reply #2 on: March 18, 2020, 02:14:00 PM »
Wait until tomorrow before the market opens and check the prices on the mutual funds again.

Amazing to me you didn't know this and yet made the call to switch from mutual funds to ETFs.

marty998

  • Walrus Stache
  • *******
  • Posts: 7007
  • Location: Sydney, Oz
Re: Explain this to me, please: actively managed funds vs index funds
« Reply #3 on: March 18, 2020, 02:14:18 PM »
Maybe the unit pricing hasn't been published yet. The accountants have to wait until close of trade to value the fund. Depending on how "quick" the fund administrator is, the price could be released early the next day or late the next day, or 2 days after.

Australian managed funds that invest in global stocks pretty much have to wait until the US market closes before the pricing process can start.

For ETFs invested in your local stocks, the data is instant because the market makers simply move the price up and down in line with your index. For everything else, you have to wait.

Bernard

  • Stubble
  • **
  • Posts: 248
  • Age: 62
  • Location: Ojai Valley, Calif.
Re: Explain this to me, please: actively managed funds vs index funds
« Reply #4 on: March 18, 2020, 02:30:52 PM »
Of course . . . that's it!
A day delay in a market that swings up and down like a pendulum, thus the opposed results.
Stupid me!