CAN YOU FIND A MANAGED FUND WHICH WILL OUTPERFORM THE INDEXES?
You are told that actively managed funds always underperform the index funds in the long run, so stick to index funds. Example. This implies, for example, that every active stock fund manager is a below-average stock picker (or can't beat the indexes by enough to meet expenses.)
Two observations disturb this view:
1. The performance of the best known stock index, the S&P 500 (large cap stocks), has been relatively poor due to the effects of the 2000-2002 and 2007-2009 recessions.
2. Some stock funds are better than others and in fact have outperformed large cap, small cap, and intermediate cap index funds in significant ways. Forbes rating of funds. We pick YAFFX to evaluate.
Two observations disturb this view:
1. The performance of the best known stock index, the S&P 500 (large cap stocks), has been relatively poor due to the effects of the 2000-2002 and 2007-2009 recessions.
2. Some stock funds are better than others and in fact have outperformed large cap, small cap, and intermediate cap index funds in significant ways. Forbes rating of funds. We pick YAFFX to evaluate.
The two numbers in green stand out. YAFFX beating the S&P 500 over a long term by over 2% is hard to ignore. YAFFX also outperformed small, mid, and large cap index funds during the two-recession 2000-2010 decade. YAFFX and other top funds [REF 68] have an above-average ability to select stocks and unless there is some reason to think that ability will begin to fail, we can conclude these stock funds are better choices than index stock funds.