Why anyone invests in individual stocks or high-cost, actively-managed mutual funds is a bewilderment. And as financial advisor Rick Ferri points out:
The truth about index funds must be repeated over and over because lies are constantly being told. Index funds are not evil, they are not destroying the markets, and will not blow-up your portfolio. ... The critics of index investing range from big fund companies to small investment advisers who claim to have strategies that perform better. ... The research cited, when there is any, is often conjured up by an active fund company that’s trying to hold onto their dwindling market share.
A small investment adviser from Wisconsin who favors active strategies wrote the Forbes article [about "Why Index Funds Are Not Good Investments".] His conclusions about index funds were far different than the evidence available in all the mainstream studies of passive versus active investing.
[Journalist Jason] Zweig talked with the adviser and investigated his data source. He found a slanted Fidelity internal report for adviser use only that claimed active managers outperformed index funds in most styles. However, in the back of the report, in small print, was a note stating the active fund data Fidelity used to make this claim was incomplete. High fee active funds and poor performing active funds were excluded. ...
And whattayaknow! As soon as Zweig wrote an article about the above in the Wall Street Journal, Fidelity tucked their "report" away where no civilian's prying eyes could see it.
But let's cut to, as My Aunt Betty often says, the chase. Warren Buffett, one of the most successful investors on the planet, recommends the Vanguard's S & P 500 Index Fund. Vanguard builds many of its asset-allocation funds with Total Stock Indexes. The late John Bogle, founder of the Vanguard Group, advocated indexing.
With recommendations and endorsements like that, why would anyone put most of their investment money in higher cost active funds?
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