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.
First, if you invest in an index via an ETF you can all but ignore his argument that "the index can substitute at no penalty but you can't" (the turnover of VTI was 3.2% in 2012). Instead of using an ETF, I believe he is suggesting the inconvenient and inefficient strategy of buying individual stocks at equal weights and manually adjusting when the index changes.
Second, despite his advice, everyone absolutely should compare their actual portfolio to an imaginary portfolio of low-cost indexed ETFs with similar allocation and risk-- because if that simple imaginary portfolio is beating your more complex one over the long term, save yourself time and money and just go with the ETFs instead. Yes, you should account for taxes and fees, but and the alternative is... ignorance?
All that said, the 30-name price-weighted Dow is indeed worthless and should be ignored.
It is a flawed article. I cannot imagine what benefit you gain when you are in dark not knowing where you stand.
You should have a benchmark portfolio that matches your risk preferences. If your actual portfolio is performing worse than the benchmark for yourself you are probably meddling unproductively.
I'm not so sure. Maybe one should look at absolute returns and not target an index. I believe I read it on some all cap fund website but forget which...
In order to beat an index you must refrain from looking like one
Comments
First, if you invest in an index via an ETF you can all but ignore his argument that "the index can substitute at no penalty but you can't" (the turnover of VTI was 3.2% in 2012). Instead of using an ETF, I believe he is suggesting the inconvenient and inefficient strategy of buying individual stocks at equal weights and manually adjusting when the index changes.
Second, despite his advice, everyone absolutely should compare their actual portfolio to an imaginary portfolio of low-cost indexed ETFs with similar allocation and risk-- because if that simple imaginary portfolio is beating your more complex one over the long term, save yourself time and money and just go with the ETFs instead. Yes, you should account for taxes and fees, but and the alternative is... ignorance?
All that said, the 30-name price-weighted Dow is indeed worthless and should be ignored.
You should have a benchmark portfolio that matches your risk preferences. If your actual portfolio is performing worse than the benchmark for yourself you are probably meddling unproductively.
In order to beat an index you must refrain from looking like one