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doreenjoy · 09-18-2009, 05:43 AM

duskdawns - It's misleading to tell an investor that an index fund is 100% for sure going to have a more successful performance than a managed or mutual fund and that you will reap gains just by passively investing everything into an index fund

I didn't say that. I said that studies have shown that between 60-70% of actively managed funds do not out-perform their corresponding index, and that is true. It is also true that given a long investing time horizon, all funds will revert to the mean. Assuming the extra risk of an actively managed fund when over a long time horizon you will earn only the mean is generlly not prudent.

As to diversification, you can achieve high levels of diversification using nothing but index funds. I have a very well-diversified stock portfolio of several different index funds, and I'm satisfied with my returns. I also have quite a bit in bonds + cash. My portfolio is boring but solid; gambling is not something I enjoy.

Anyone who is on the verge of retirement should not be more than 50% in stocks, but people get greedy and no one ever thinks a bull market is going to end. Having lived through 1974 I never trust long bull markets.

But that is all IMO, I am not an investing guru, just a CFO.

09-18-2009, 05:43 AM	#9
doreenjoy 01000100 01001010 Posts: 1,889 Karma: 2400000 Join Date: Mar 2009 Device: Polyamorous	duskdawns - It's misleading to tell an investor that an index fund is 100% for sure going to have a more successful performance than a managed or mutual fund and that you will reap gains just by passively investing everything into an index fund I didn't say that. I said that studies have shown that between 60-70% of actively managed funds do not out-perform their corresponding index, and that is true. It is also true that given a long investing time horizon, all funds will revert to the mean. Assuming the extra risk of an actively managed fund when over a long time horizon you will earn only the mean is generlly not prudent. As to diversification, you can achieve high levels of diversification using nothing but index funds. I have a very well-diversified stock portfolio of several different index funds, and I'm satisfied with my returns. I also have quite a bit in bonds + cash. My portfolio is boring but solid; gambling is not something I enjoy. Anyone who is on the verge of retirement should not be more than 50% in stocks, but people get greedy and no one ever thinks a bull market is going to end. Having lived through 1974 I never trust long bull markets. But that is all IMO, I am not an investing guru, just a CFO. Last edited by doreenjoy; 09-18-2009 at 05:49 AM.