Index funds vs. active management

[Kat Kid]

S&P 500 outperformed 71% of actively managed large cap funds in 2008.

Anyone want to shed some light on this?

[jeffy]

Putting money in and letting it ride is a whole lot smarter than trying to time the market, so most fund managers simply are wrong more than they are right.

[AzCat]

Utterly normal though I'm surprised that 29% actually outperformed the S&P.  There's reams of literature on this issue but the punch line is that management fees + active trading costs cause even good managers to underperform the market most of the time.  The really wild thing is that even among the fraction that outperform in any given year there's very little correlation between the current year's high performance and how well a particular fund will perform in future years.  On the flip side there does exist a middling correlation between lower-quartile performance and the prospects for a fund's performance in the lower quartile in future years.   

[steve dave]

Hey, d00ds, just ran into Warren Buffett here in San Diego and he told me to tell you thanks for finally paying attention to what he's been preaching for a brazillion years.

[kougar24]

Hey, d00ds, just ran into Warren Buffett here in San Diego and he told me to tell you thanks for finally paying attention to what he's been preaching for a brazillion years.

^