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Does it ever make sense to buy actively managed funds?

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Mike Zaccardi
Mike Zaccardi
1 month ago

As long as the costs (expense ratios) are low, that’s all that really matters. It appears that ex-US and EM funds can do fine or better than index funds, but you just have to be careful you don’t performance chase. It’s funny to look at the investment lineups in 401k plans – they often feature some index funds and a slew of the last 10 years’ hottest active funds. And guess what many participants go for… thankfully, target-date funds are becoming mainstays in plan lineups nowawadays.

Richard Gore
Richard Gore
2 months ago

I know the stats, but I only buy individual stocks or actively managed funds. I think the key is to have confidence in what you own so you don’t panic in the panics.

Carl Book
Carl Book
2 months ago

I would never recommend an actively managed fund. It is just too hard to beat the averages after expenses are considered. If you know you can generate an average return, why would you risk under-performing the market average?

Adam Grossman
Adam Grossman
2 months ago

I do think it makes sense on the bond side, and especially in the international bond space. If a bond index is market cap weighted, what you’re doing when you buy the index is to buy more of the most heavily indebted entities. That’s never struck me as a good idea.

Carl Book
Carl Book
2 months ago
Reply to  Adam Grossman

I’ve never read any articles comparing the returns of index funds versus active funds. I suspect bond funds are not that different from stock funds.
Expenses matter and it is hard to beat averages over time.

Marc Bisbal Arias
Marc Bisbal Arias
2 months ago
Reply to  Adam Grossman

Interesting point. What would you say is a decent management fee to pay for an active bond fund?

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