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17 Managed (Vanguard) Funds That Have Beaten the Indexes Over a 17 Year Period
How much better can low cost managed funds do than the above two index funds?
To answer this question, I searched the complete lineup of Vanguard managed funds to find all those that have been around since at least the start of 2000. There were 20 such funds. (Note: Just one generally available stock fund shut down over this period, which if excluded due to poor performance, might make the results for the remaining funds look better. However, the shutdown was due to other factors, not poor performance.) I then researched the yearly average performance of each of these funds and compared each to the yearly average performance of either VTSMX or VGTSX, depending on whether the particular fund's main focus was domestic or international stocks. The following table shows the results:
One problem I have with the data is its starting point (2000 market top). Index fund often get crushed in downturns in the market since these types of fund remain totally invested. Managed funds have the opportunity to make risk on/ risk off decisions. Moving the data backwards or forward three or four years would have improved the index funds long term performance compared to these managed funds.
Also, not considered by the author are low cost managed allocation funds. Vanguard has two fine choices, VWINX and VWELX.
Below are two charts that compare VWINX, VWELX and VTSMX over the 2000 - 20017 time frame and then a little further back. It illustrates that picking investment timeframes can make a huge difference in results. Timing plays a significant role with index funds since they don't manage market valuation risks, they are always fully invested.
This charts shows that buying at the top of the market is a real killer:
Comments
Also, not considered by the author are low cost managed allocation funds. Vanguard has two fine choices, VWINX and VWELX.
Below are two charts that compare VWINX, VWELX and VTSMX over the 2000 - 20017 time frame and then a little further back. It illustrates that picking investment timeframes can make a huge difference in results. Timing plays a significant role with index funds since they don't manage market valuation risks, they are always fully invested.
This charts shows that buying at the top of the market is a real killer:
Compared to: