Apparently, even last year’s market meltdown did not detract some from continuing the most useless discussion of the past few years.
The topic is as to whether ETFs are better than mutual funds. MarketWatch reports as follows in “Actively managed funds lose share to index rivals:”
Mutual fund investors in 2008 yanked more money out of actively managed stock-funds than they put in for only the third time ever, and index-fund rivals took the spoils.
The shift reflects a budding sentiment among many investors — especially after a devastating 12 months — that active fund management isn’t always worth its higher fees. Index funds track a market benchmark and so provide average performance, typically at a much lower cost than actively run counterparts that try to beat the market on the upside and cushion blows on the downside.
Most managers fail to outperform their benchmark in a given year, however, and this unforgiving bear market is no exception. Average losses for stock-index funds last year were 39.1%, while actively managed funds lost 40.5% on average, according to investment researcher Morningstar Inc.
“Some people who get their hands burned by these market drops move from active to passive [management], and every time some of them stay there,” said Morningstar analyst Scott Burns.
As well as pocketing lower returns, Burns said investors in actively run funds are more likely to chase performance and tend to be less focused on asset allocation. As such, they are quicker to dispose of their holdings.
[My emphasis]
And chasing performance is a bad thing, while focusing on asset allocation is a good thing? Leave it up to Morningstar to (again) dispense that much garbage. They still haven’t figured out that those portfolios with fancy asset allocations got killed last year as they did in the bear market of 2000. For a while now, they’ve been jumping on the ETF bandwagon as if ETFs are the savior of the investment world. Look at the highlighted section again and tell me this: Say, you had invested in mutual funds last year and lost 40.5%, while your “smart” neighbor had selected ETFs and “only” lost 39.1%. Do you think that he’ll be much happier than you are? Of course not! The question, as I pointed out many times, should not be which one is better, but how you use these tools. There are times when mutual funds outperform ETFs and vice versa. Accept it and live with it. Using both in conjunction with my trend tracking methodology will allow you to select only those that are most suitable at the moment you are deploying assets in the market. Trying to simply favor one tool over another without a clearly defined exit plan in place will only lead to uncontrollable losses as history has shown over and over again.
Comments 8
Ulli,
You simply must visit this page and ponder the nonsense.
Here’s an example: “…if you’ve not already proven that you can time the market effectively and consistently beat these passive strategies, then you have no excuse but to implement them until you do.”
Farrell and his followers never give up.
G.H.
Ulli: Please give us some guidance on where to park the cash. Can you not help us get slightly better returns than money market, please?
Thanks
I hope all your subscribers who have been watching the news and if possible they will attend the tea party in Washington this friday. Obama is in the process of destoying the american dream so he can redistribute the wealth. Shame on any American that gets in bed with this IDIOTT!!!!!!!!Snoobers
Anon,
In these times of great uncertainty, I prefer having my assets in money market, even if it were to pay no interest.
Interest in money market will never grow your portfolio, only a good investing strategy will. Just don’t worry about it. Better be safe than sorry.
Ulli…
Ulli,
The article that you referenced almost makes me sick. My question is why would anyone continue to recommend the Buy & Hold strategy such as the lazy portfolio and seeing what it did in the 2000-2003 bear and now in the "Crash" of 08 thru 09…. lazy is an appropriate name for it as in my opinion only people who are totally lazy and don't mind losing their hard earned money would ever do this sort of thing. Think about it 12 years of gains all wiped out now in approx. 16 months. Maybe it is time to take a second look at what is going on around him. I like the author of the article that you recommended, he does lots of great articles, but I don't agree with the lazy buy & hope portfolios in a secular bear market, maybe in a bull market they would be ok. Maybe that author should check out the results of the following timing services and just maybe he would change his mind about trend timing the market. All the below listed timing services protected their clients accounts from loss during the "Crash of 08 thru 09…. and actually made lots of money instead. All of these have a good record for many years as I have checked them out by back-testing them based on their buy and sell dates. They go long during uptrends and most go into bear funds during downtrends. Of these services one is free, two are about $20 each per month and one is about $70 per year.
http://www.successful-investment.com
http://www.timing4profit.com
http://www.performancesignal.com
http://www.mutualfundmagic.com
Ulli: Many thanks for your guidance. I value your insights.
Snoobers this suppose to be a financial site. Yu are the idiot parroting that right wing dogma. Look buddy, Phil Graham got the law changed to help his wife's lobby client to destroy the mortgage industry. The banks leveraged up to 70-1 and the rating outfits S&P;/Moody etc. put up phony bond ratings. Where the hell yu been the last year. Bush redistributed the wealth the last 10 years. Borrowing nearly a trillion bucks from China to give a tax deduction to the upper 1% whose wealth increased by 20%. Obviously from what yu write yu sure "ain't" one of those 1%ers just a lowly idealogue zealot. I got news for ya! Its yur ilk that destroyed the middle class which was the golden goose. Whose wings are wall street going to clip every few years in a bear mkt to shave off their profits??? Yu do know why this recovery is predicted to be L-shaped dont yu. The gig is up and it aint coming back. Get use to it. Please reframe from rt wing talking pts. The Amer$can dream – bulletin its been canceled!!!!
Ulli,
What in the heck was that last comment about it sounded like that person had been sniffing something as it didn’t make any sense whatsoever. Maybe someone who lost all their money and now is burdened with a chip on his/her shoulder. It was just plain dumb and had nothing to do with anything on Ulli’s site.