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Old 07-10-2005, 12:25 PM
Sniper Sniper is offline
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Join Date: Jun 2005
Posts: 704
Default Re: Why Mutual Funds are better than Index Funds

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How much money does Berkshire Hathaway hold in indexes? If Warren Buffet puts his money where his mouth is, then there is good reason to invest there. But the smart investor will follow his actions before acting on his advice.

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Kinda hard for the small investor to buy out a collection of family owned business [img]/images/graemlins/wink.gif[/img]

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if you follow the link provided before, you will see a number of mutual funds trouncing the index thanks to the talent of one manager.

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I followed your link to CI Investments... first, their funds are only available to canadians. Second, a quick review of their fund performance list, did not show anything that outstanding. Third, for funds primarily invested in canadian stocks, the S&P500 wouldn't be the appropriate benchmark.

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So the bottom line is: follow the example of the proven managers. Invest like they do. But if you don't have the time or the inclination to do that, then pay them to invest your money for you. Do this so long as the net return after fees does better than the index over a reasonable period of time, or at least gives you peace of mind due to less fluctuation.

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You continue to disregard the fact that many people do not care to invest the time required to find the best funds/managers. Also, alot of research has demonstrated that the funds that perform best in any one year, and thus get the most cash inflows due to heavy advertsing of their performance, tend to underperform after that.

Bottom line: many people aren't willing to put in the time required to adequately make good decisions about their investments, and thus low fee index funds are a better investment than unresearched high fee mutual funds for those people.
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