It is very difficult to beat an index fund in an up market.

If you want to compare performance of active versus index, you should look at a cycle which included both a bull market and a bear market.

Ten years ago, a Vanguard investor seeking to invest in a large value fund had three choices. Here are the returns of each:

Windsor II: 10.25%
Equity Income: 9.65%
Value Index: 9.07%

Petrocelli

Originally posted in thread: 51574

You are right that I could have been clearer. I was addressing my comments directly to Adrian, and both he and me know that inflows get distributed by cap-weighting.

Thanks, Ken.

Originally posted in thread: 51574

LMVTX has lagged S&P500 over a period of more than 15 years. At least that's what Yahoo Finance says..

Is there a way to post a bit-map file here? If not, please compare LMVTX with SP500 for Max time frame in Finance.yahoo.com to verify.

Is it due to the ER factor (1.68)? Then what's all the noise about Bill Miller beating S&P500 for 15 years in a row?

Originally posted in thread: 51574

1) "Loser Risk" is based on the belief that stock pickers can actually avoid losers over the long term. Not many people here believe in the existance of managers who can do this over the long term. If you find one who can guarantee (i.e. money back) his ability to avoid losers will outperform the appropriate index...let us know.

2) "Momentum Risk" is simply another word for "market risk". Would you like your manager to try to pick the top or bottom? Or would you like him to pick stocks that do not participate in the momentum effect? Or is what you really want them to do is hold 30% bonds and not tell you about it? This is definately a strange way to think and in the end you have little control over what a manager actually does besides vague prospectus language (Although I doubt many equity managers are allowed to hold 30% bonds).

These terms are a bit confusing to me personally so I will attempt to rationalize why you would be concerned with them:

You would like to believe that a professional money manager can make judgements that will "pick winners" and "avoid crashes". Or, you think that there are investing strategies which allow for less volatility while capturing similar returns. I haven't seen too much proof of either of these for long term investors. Certainly we can backtest all kinds of stuff and come up with great ideas that don't work at all going forward. "Avoid growth stocks and load up on small value" is just the flavor of the decade, check back in 30 years.

Originally posted in thread: 51574

who wants to bet Andy has been checking the monthly performance of this active fund for the last ten years, just waiting for the chance to pounce on any underperformance for the last 10 years?

Seriously Andy, you spend way more time checking performance than anybody I know.

Originally posted in thread: 51574

Why is that every time I look up Sharpe Ratios for good active funds vs Index Funds the active funds alway win?

Ken.

Originally posted in thread: 51574

How do you define a "good" manager? One that has a high Sharpe Ratio, perhaps?

Originally posted in thread: 51574

Yahoo charts will not give an accurate representation of returns over long time periods because they will only show NAV. MSN has a "growth of $10,000" chart which will give a much more accurate comparison. This chart shows that over the last 15 years $10000 has grown to:

VFINX: $43,108 (+331%)

LMVTX: $77,783 (+678%)

Originally posted in thread: 51574

I restrict myself to VG...They have cheap ERs, that's where all my other investments are located, and I trust them.

So that limits my choices to VG's offerings, and for a given asset class there are only so many choices.

I really don't look at managers, I look at fund performance...cumulative return.

Good Luck, Ken.

Originally posted in thread: 51574