Quote:
Originally Posted by jay santos
Yes, that's the strategy. And the tactical implementation is through index funds, especially Vanguard index funds.
|
Vanguard is a good choice; they have always done a good job of keeping both costs low and tracking error (how closely the fund tracks their benchmark) low. Actually, these days there are a lot more funds that do a nice job as well (particularly among ETFs).
Quote:
Originally Posted by jay santos
The basic theory is that no (or very few--and it's probably the random few not the talented few) money managers will beat the average market return after costs long term.
|
This is largely consistent with the empirical evidence when looking at after cost mutual fund returns. There is some persistence in mutual fund performance, but it is almost entirely confined to an one year ahead horizon (Also, it is probably not a manifestation of stock picking skill but the well known historical pattern of mediun term continuation in returns). There tends to be more persistence if you track managers instead of funds, but overall you assesment of the mutual fund industry sounds about right.