Here's an interesting piece from BusinessWeek. The article is on Barclay's and how they hire top academic quants to help them beat total stock market returns. It's quite an interesting read and if you'd like to see how this innovative company is hiring some very bright people to help them invest (and beat the market -- something most stock managers can't do consistently), I suggest you check it out.
But what caught my eye was what the piece had to say about investing in index funds. Here's their conclusion:
This deep look into the workings of the planet's largest quant shop abounds with informative lessons for the average investor. Unfortunately, though, they add up to this simple, humbling imperative: Get thee to an index fund. Now.
Ha! I'm at the point where I don't need to advocate index funds any longer -- everyone else is doing it for me!
And, of course, they have to include the often-quoted stats about how lame the average actively managed fund is compared to a comparable index fund:
Over the last five years the s&p 500-stock index has outperformed 71% of large-cap funds, the s&p MidCap 400 has topped 83.6% of mid-cap funds, and the s&p SmallCap 600 has bested 80.5% of small-cap funds, according to Standard & Poor's.
For more thoughts on the value of index funds, see these posts:
Isn't Barclay's the financial institution behind many of the indexing ETFs? I didn't read their article (I should, I know), but isn't that a little biased?
I mean they are right to advocate it, but it's like Nautilus promoting exercise. People should do it and it's good for them, but hardly a shocker.
Posted by: Lazy Man and Money | February 20, 2007 at 03:52 PM
You need to read the article. The conclusion isn't from the company, it's from the author.
Posted by: FMF | February 21, 2007 at 07:25 AM