Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
We speculate that filtering actively managed funds may shift the probability curve closer to an all-index-fund portfolio as in the low-expense example, but we are not convinced that any filtering methodology will significantly alter the balance in favor of all actively managed funds. This may be an area for future research.
The random selection amongst funds or filters like low cost across the entire eligible fund space is good for the choir to hear but doesn't reflect the reality of how funds are selected.
What would be a realistic study is one that picks active funds as most informed investors do using sites like this and reevaluating every 2-3 years to either continue or replace each fund. It would either shatter the indexing religion or show sites like MFO to be useless.
I am not sure either side in this religious debate wants such a study done objectively and scientifically, afraid of what it may find.
Reply to @cman:''Seems like the data is available use the Money 70 , the Kiplinger 25 and the Forbes honor roll. All those sources go back enough years to provide data for a pretty good study.I suppose you could use the Great Owl funds from this site but then you would have to wait a few years for results
Did you ever try to drive a car along a mountain road? Turn after turn, the driver is tense and tired, but everyone else wants to puke. Then you offer your passengers to drive, they feel tense and tired and you want to puke. I guess if you know what you are going to do at each turn of the road, you can make it, but those who are out of control, like your passengers, cannot stand it at all.
Similarly, those who actively involved in investments may feel that they at least control something and prepare for twists and turns of the market. Those who allow others to drive, may jump from the car on full speed. Of course, there are others, who can just sleep on the back seat. They are doing better than everyone else.
Sorry for theses analogies, just wanted to understand my own feelings with respect to active versus passive.
Reply to @jerry: Yes any list that isn't based on just taking the top performing funds for the last year or three or five should be a good start. Anything that models reality more than their artificial construct for selecting active funds that is just garbage in garbage out.
Comments
What would be a realistic study is one that picks active funds as most informed investors do using sites like this and reevaluating every 2-3 years to either continue or replace each fund. It would either shatter the indexing religion or show sites like MFO to be useless.
I am not sure either side in this religious debate wants such a study done objectively and scientifically, afraid of what it may find.
Similarly, those who actively involved in investments may feel that they at least control something and prepare for twists and turns of the market. Those who allow others to drive, may jump from the car on full speed. Of course, there are others, who can just sleep on the back seat. They are doing better than everyone else.
Sorry for theses analogies, just wanted to understand my own feelings with respect to active versus passive.