Index Funds

People put money into index funds partly because indexes beat most active managers. Nothing is going to change that because, collectively, active managers hold essentially the same assets as the indexes. So collectively, their returns have to be the same, minus costs, which are larger`; Rob Arnott Barron`s December 2008

  • Seth Klarman thinks “indexing is a horrendous idea”. FAJ Sept/Oct 2010
  • When you invest in an index fund do you obtain a group of stocks carefully chosen by a term of analysts and portfolio managers. Do most professional beat the market? Actually, stocks removed from an index tend do better: they are no longer over-priced.
  • Buying an index fund when the index is low is a great idea. Is that now?
  • Fees are lower with index funds. Lower than what?
  • The logic some people use is: most managers do not beat the market, hence you should buy an index fund. Does that make sense?
  • Can you beat the market with an index fund?

I'm after retirement income. Do index funds pay much income? Or, is one hoping for a gain with an index fund and then planning to sell to the greater fool. Dividends are much more dependable than capital appreciation. What if the market goes against you just as you retire, as it did in 2008? Oops!

  • More ideas to come for this page from time to time. I was just reading a column in the ROB (Sat May 2 2009) about an adviser who puts her clients into exchange traded funds instead of mutual funds. Hello! Where's the income!
  • I read in the Report on Business on June 17 2009 that John Bogle has evidence that people who invest in ETF trade more than people who invest in mutual funds. Perhaps they have not read the paper: Trading in Hazardous to your Wealth. My summary of that paper is posted inside this site.
  • In 1900 the Dow Jones Industrial Index was at 71. Twenty years later, the DJII was at 72. Buy an index fund at the wrong time and you are eukered (sp).
  • ”[I]n real terms, equity prices can fail to rise for an extended period: in 1982, the S&P 500 index was no higher, after adjusting for inflation, than it had been in 1929.” (The Economist, Buttonwood's blog, September 13 2010) TC: Buy an index fund at the wrong time and you will lose. Buy a stock which does not pay a dividend and you might not obtain any return.
  • If you consider it mathematically, half the stocks in the any index have to under-perform. If you buy an index fund, are half your selections going to be losers right of the top? And a lot of the selections probably will not pay a dividend.
index_funds.txt · Last modified: 2010/12/30 14:35 by tom
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