Wednesday, April 24, 2013

PBS Frontline (4/23/2013) - Powerful evidence in support of indexing

"The evidence is overwhelming. Year after year, actively managed mutual funds fail to beat index funds. Studies have born this out repeatedly over various periods in bull and bear markets"

The quote is from the April 23, 2013 PBS Frontline documentary on the 401K industry, link below:

http://www.pbs.org/wgbh/pages/frontline/retirement-gamble/

It is one hour and it is excellent - especially the last 1/2 hour which focuses on fees and index funds.







Monday, April 22, 2013

Bad Investor Behavior: A Graph

This simple graph, produced by BlackRock, shows mutual fund money flows (blue bars) vs. the return of the S&P 500 (US Market). 
The graph demonstrates how investors pull money out of the market when stocks are low and buy into the market when the stock market is high. Investors do the opposite of buy low and sell high. It is no wonder the average investor underperforms the market. Investors act on fear and not rational analysis.
Ideally inflows would have been up in 2002 and 2009/2010.