Index funds for the win! (But we STILL need some folks)

[Aman A.K.A. Ahamburger]

Good read.

I like the idea of the majority sticking to indexing. It would produce a lot less heartache, and would weed out the poor fund managers. There will always be people wanting to trade stocks for themselves, and wall street would still function fine in this environment. Volatility and value will always be with us.

[verrip1]

I agree that people who cannot select managed funds which beat indexes should invest passively.

[djAdvocate]

i tend to avoid managed funds for this reason, and i have generally outperformed the market as a result.

however, i would also add that i tend to just "buy the market" in secular bulls.  it makes little sense to spend time fretting over a portfolio that is going to yield a passive return of 20%+. 

investing in 1985-2000 was super easy.  investing since then has been more challenging, but has produced similar returns. 

[Aman A.K.A. Ahamburger]

Jun 7, 2017 13:35:46 GMT -5 verrip1 said:

I agree that people who cannot select managed funds which beat indexes should invest passively.

Such a simple concept in theory, right? I think it comes down to the fund industry itself. Always with the new products, and new funds; all with great perks for the salesman...

[verrip1]

The worst passive funds of all are the total bond market funds.  With the enormous growth of ultra long bonds created for QE, a weighted, cross-market bond index is inextricably mired in some of the poorest performing bonds in the market: treasuries and agency bonds.  Further, such an index is also enormous in its duration; a known risk from the higher interest rate environment that we are in.

[... and, yes, I know that the Fed is planning to reduce its QE engorged bond portfolio, but their plan reportedly is to reduce by not re-investing the principal from maturing issues, so duration won't be materially reduced for quite some time ..]

[Aman A.K.A. Ahamburger]

Right?? IMO, the bond market is in for some serious pain in the coming years. The size of the overall market and the state of International finance... Like, a bank in Spain just sold for 1 euro... But negative interest rates aren't fraud.

Letting their portfolio mature is the only way the FED will reduce their balace sheet. We talked about that years ago around here, and like you said; it's now the reported plan.