"Index Fundamentalism Revisited"
Is there any justification for investing in managed mutual
funds or are managed funds for suckers, as indexing
advocates argue? We answer this question by looking at a
long time span of real fund returns (26 years) for one
specific company (Vanguard) that is notable for its low
fees on managed funds. By creating synthetic portfolios—
portfolios based on weighted averages of the assets of
Vanguard’s mutual funds—we find that whether index funds or
managed funds are the superior buy depends on the time span
in question, but that managed funds almost always have a
lower standard deviation of return than index funds.
Journal of Portfolio Management
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