No. of Recommendations: 1
Greetings again Vlad,

I am afraid we are so far off the original topic.

True, although the original topic was something along the lines of was an S & P 500 index fund a good thing to shift into or not from a couple of actively managed funds, no? Thus the merits of indexing can be thought of as something in this discussion as well as switching in the midst of a bear as opposed to in a bull market.

I do not want to debate this whole index funds vs. actively managed funds thing.

On one level that is what this is and to some degree what I'm asking for is the proof that the majority of fund managers clobbered the index in the bear rather than just a few as while you state a good theory that cash could act as a ballast for actively managed funds, does this in fact work? I'm still a skeptic and to some degree this is an academic debate.

But how is the category relevant?

Of the nine different indices noted on http://www.barra.com/research/summary_returns.asp Vanguard has funds tracking all the large-caps, the mid-cap and the growth and value halves of the Small-cap 600 and as such one can take an approach of slicing up the market into the 4 corner segments, as defined by combinations of large/small and growth/value, and investing equally amongst them(called 4x25 or Slice and dice) with the intent that this will be a better approach than a straight S & P 500 fund. Category is relevant as when say mid-cap and small-cap indices are beating the 500(Of which 6 out of 9 are YTD), the funds investing in those segments SHOULD be winning and if I have an index fund or ETF tracking it then that can also be in the group of index beaters while being an index fund for an amusing paradox.

This search gave me 13 funds. The last one on the list was Vanguaud Institutional (VINIX). The first 12 beat it. Maybe they did not do it every single year but they did it on a consistent basis. So, if I had put proverbial $10,000 into any of these 12 funds I would have ended up earning more than having money in the index fund. Sorry for no link but you can easily run the search yourself knowing the criteria.

There are threads started by belairpatrol that have similar results and discussions should anyone still be reading this.

One thing is clear is that if we don't have a bull market, the index fund will be stagnant. Considering that in the next 10 years in the opinions of Warren Buffet and John Bogle the market will grow around 4%-5%, index funds may not be a very compelling investment as managed funds are likely to beat this number.

Of course it is worth noting how often those opinions have been right and wrong and to what degree could an investor go into other categories and get alternative returns, eg REITs, small-caps, value, etc. In those situations an index fund can still work as long as the index itself isn't stagnant.

JB
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