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Q&A With Scott Burns: The Difference Between A Managed Fund And An Index Fund
I agree entirely with the referenced article. Without providing supporting documentation, I can answer the question in 9 words: The difference between a managed fund and an Index fund is "lower costs and better returns for the Index fund".
An overwhelming body of evidence supports that assertion. It is appalling that 70% of active fund managers fail the Index benchmark test. And the more active funds in a portfolio, the accumulated data demonstrates the wisdom of cutting actively managed fund choices.
Managing portfolio volatility contributes to portfolio performance. Some folks don't accept that little bit of portfolio management wisdom. You can easily check the impact of volatility control by doing a few Monte Carlo what-.if experiments on the MoneyChimp website. It is easy to use and very fast. I have Linked that tool earlier, but here it is once again:
Enjoy. The Monte Carlo simulations demonstrate the power that volatility exerts on portfolio survivabilty, especially during the drawdown segment of a portfolio's lifecycle.
You all probably realize that I'm a big fan of Monte Carlo simulations when making financial decisions. Monte Carlo methods were specifically developed to address uncertainties and that's in the wheelhouse of investment decision making.
That was why I posted the Link to MoneyChimp. There are plenty of free Monte Carlo simulators available on the Internet. I selected the MoneyChimp offering because of its simplicity in inputs. But it is limited.
Upon further thought, I concluded that I could make a better suggestion with just a little more demanding input, but definity a more flexible planning tool. In fact the code is called The Flexible Retirement Planner. Here is a Link to it:
Comments
I agree entirely with the referenced article. Without providing supporting documentation, I can answer the question in 9 words: The difference between a managed fund and an Index fund is "lower costs and better returns for the Index fund".
An overwhelming body of evidence supports that assertion. It is appalling that 70% of active fund managers fail the Index benchmark test. And the more active funds in a portfolio, the accumulated data demonstrates the wisdom of cutting actively managed fund choices.
Managing portfolio volatility contributes to portfolio performance. Some folks don't accept that little bit of portfolio management wisdom. You can easily check the impact of volatility control by doing a few Monte Carlo what-.if experiments on the MoneyChimp website. It is easy to use and very fast. I have Linked that tool earlier, but here it is once again:
http://www.moneychimp.com/articles/volatility/montecarlo.htm
Enjoy. The Monte Carlo simulations demonstrate the power that volatility exerts on portfolio survivabilty, especially during the drawdown segment of a portfolio's lifecycle.
Best Regards.
You all probably realize that I'm a big fan of Monte Carlo simulations when making financial decisions. Monte Carlo methods were specifically developed to address uncertainties and that's in the wheelhouse of investment decision making.
That was why I posted the Link to MoneyChimp. There are plenty of free Monte Carlo simulators available on the Internet. I selected the MoneyChimp offering because of its simplicity in inputs. But it is limited.
Upon further thought, I concluded that I could make a better suggestion with just a little more demanding input, but definity a more flexible planning tool. In fact the code is called The Flexible Retirement Planner. Here is a Link to it:
http://www.flexibleretirementplanner.com/wp/
Please give it a fair try. What-.if, sensitivity explorations are easy and fast. Sorry that I did not include this option earlier. Good luck to all.
Best Wishes.