Active Funds vs. Index Funds?

[Gordon Gekko]

Does anyone have any info on which funds are better?

I have 9 Active managed funds and the on going costs are 2200 per quarter.

Would it not be better to go say the MSCI index or some other index to try to cut the costs?

I've read active managed funds hardly beat the index anyway.

And I'm sure the index funds are more tax effective.

Any thoughts.

 

[reece55]

Re: Active Funds vs Index Funds

Gordon
Can't remember the study, but there was one done in the US some time ago that clearly indicated that index funds over the longer term significantly outperform actively managed funds.....

This is not to say that some don't do very well - i.e. there are definitely exceptions to the rule, but you need to be selective....

I would make the assumption that the ASX would be the same....

Not sure about how the hedge funds stack up, however due to the fact they are really only a new phenomenon, we might not know yet...

Cheers

 

[ta2693]

Re: Active Funds vs Index Funds

If everyone goes for Index fund, then active fund will outperform.
If everyone goes for managed fund, then index fund will outperform.
So, If I were you, I will put half of my money into active fund, half into index fund.

 

[Gordon Gekko]

Re: Active Funds vs Index Funds

Not sure I follow the 1/2 index 1/2 Active info.

Are not fee's fee's (especially high one's) And if most or all cannot beat the index over the long term and buy and sell in a way to make there performance look good to new investers but screw existing one's with CGT.

Maybe some additional comments can help me see the light.

Another question: I have a margin loan at 48 % LVR, Can I also gear into index funds?

I have been investing for 16 months and if index funds are better over the long term I would like to unwind my active funds and purchase index funds in a way that will reduce my CGT.
Even if this means unwinding over the next 16 months.

Thanks,

 

[theasxgorilla]

Re: Active Funds vs Index Funds

Another question: I have a margin loan at 48 % LVR, Can I also gear into index funds?

Yes!

And usually much higher than 48%...St George will let you go to 70% on all Vanguard Funds with the exception of the emerging markets. I did as you plan to do with my super as the monkeys who manage it were doing okay, but even if they didn't do okay, they were going to keep doing okay because of the fees they were charging! (if that makes sense).

I'm not sure that having 8 funds is necessary. This is just my opinion and I haven't looked into it, so take it with a grain of salt. I like the Buffett quote along the lines of, put all your eggs in the one basket and watch that basket! Even though index funds are not 'active' investing per se you still get to determine which index fund(s) to go with, whether to hedge international funds or not, how much leverage, and when to enter and buy more. Each of these can have an impact on your bottom line.

If you are doing this with super one method to control when you buy more is to have your contributions go into a cash management equivalent type of investment then rebalance at your discretion. Of course in a run away bull market with no real dips to buy into, maybe you don't want to do this.

Food for thought.

ASX.G

 

[Temjin]

Re: Active Funds vs Index Funds

If everyone goes for Index fund, then active fund will outperform.
If everyone goes for managed fund, then index fund will outperform.
So, If I were you, I will put half of my money into active fund, half into index fund.

That's not true. There is no correlation between an active managed fund's performance with how much money in the market is invested into it.

It is a fact that most active managed funds DO NOT outperform the index, not to mention some of them charge quite a bit in management fee, etc.

Index fund will always underperform the market by a little bit, but generally do outperform a majority of the active managed fund after all fee.

 

[Gordon Gekko]

Re: Active Funds vs Index Funds

Thanks for all the advice!!

One more thing:

Where is the best place to buy the index funds? E-trade or one of those?
I would like to buy monthly.

Thanks

 

[macca]

Re: Active Funds vs Index Funds

Hi GG,

Have a look at stock code STW, it tracks the ASX200, pays divs and you can gear into it.

They have another code as well, go to their website and have a read.

 

[Inv]

Re: Active Funds vs Index Funds

I think the idea is that beating the market is a zero-sum game. We can't all beat the market; at most, only half of us can. Taking fees into account, then even less than half can. Of course in reality, winners aren't going to perfectly offset losers, so winners (defined as beating the market) may be 40%, 30%, 20% or even only 10% of all investors.

I'm not saying one method is better than the other though.

 

[osmosis]

Re: Active Funds vs Index Funds

What are the advantages of listed index funds over unlisted index funds?

 

[guydebyl]

Re: Active Funds vs Index Funds

Thanks for all the advice!!

One more thing:

Where is the best place to buy the index funds? E-trade or one of those?
I would like to buy monthly.

Thanks

Any broker will do. The problem has been finding listed index funds, but Ishare and other such etf funds seem the way to go.

Vanguard also sells index funds. You can't buy them on the exchange. You need to fill in a registration form with Vanguard. Also, their fees seem to be high. I'm not sure how the fees compare with brokerage fees etc. by buying index funds on the exchange.