tar42:

Ahso, friend chin, but the value manager doesn't hold 'all' that 'ugly" stocks that the index fund must hold. The value manager only buys what they feel through analysis meet their requirement to be considered of value, while the index fund must ride the some "ugly" stock down and back up again and only gaining what was lost. You can see evidence of that in the past downurn, Chin, if you believe the charts.

Tim

I look at a bit more than just charts Tim. The S&P 500 value outperformed 54% of the value managed funds, DJ Wilshire Large value 77%, Russell 1000 Value, 84% and MSCI US Prime Market Value, 81% for the 10 years through Dec 31, 2006.

The reason some value funds offered less risk in some bear markets is that they hold cash, as well as they can hold mid cap value which trounced the mid cap value funds, and they can hold more in something such as metals and energy, which if you remember is part of the portfolios I offer up for food for thought.

All told, apples-to-apples going back to the 1973 - 1974 bear market, managed funds do not consistently even offer less risk than the Wilshire 5000, and as already offered, only 2% of the managed funds, that is 2% of all managed funds beat the S&P 500 1970 - 2003, a feat a simple 4x25 portfolio of index funds would have managed.

Oh, and the more pure value DFA fund;

This is not to say some managed funds won't beat index funds, but this gets us back to the question, How do you know?

Once again, this is the question you asked I put in a new conversation;

"How do you know the superior fund manager?"

Who has been is easy to answer.

And, I have offered nothing saying index funds are superior to managed funds. I am saying I cannot identify the superior manager for the next 5 or 10 years, much less then next 50.

If Peter Lynch, or Bill Miller (Hi R48 ;), could not keep going, why should I think any other mutual fund manager can?

Chin