8 Amazing Stats (or opinions) From John Bogle (Indexing vs. Trading vs. Mutual Funds)

Discussion in 'Trading' started by ByLoSellHi, Mar 20, 2007.

  1. Some of these, I found simply incredible.


    1. Mutual fund investors are bound to lose (and in most cases you pay the fund manager outrageous sums to lose you money)

    2. Most investor are ill-equipped to pick individual stocks

    3. Index funds are the best way for the average person to invest in the market and reap the full benefits of the U.S. economy

    4. Between 1994 and 2004 Morningstar 5 Star (Top Rated) Funds returned 6.9% annually vs 11% for the Total Market.

    5. After the market bubble of 1997-1999, the "Top 10" funds from those years plummeted. From 2000-2002, not a single one was ranked higher than 790 and they were outperformed by 95% of their peers.

    6. From 1982-1992, the top fund in each year averaged a ranking of 285 the following year.

    7. From 1995-2005 the top fund in each year averaged a ranking of 619 the following year.

    8. Of the 1,400 mutual funds out there, in the last 40 years, only one has beaten the market for 15 consecutive years (and that streak just ended in 2006) Legg Mason Value run by Bill Miller.
  2. Bogle is pre-disposed to indexing so it is not surprising he found statistics, which are formal ways to express an opinion, that support his position.
  3. not too amazing

    how do you think the mutual fund manager gets paid?

  4. Morningstar is a total joke, and Bill Miller is vastly talented.
  5. #4 and #8 seem meaningless without comparing the risk (e.g. variance of the returns) as well
  6. Also mutual funds are a joke and do not represent actual investing.
  7. somebody likes passive investing :D
  8. Yeah, John Bogle. With low fees and no churning/commissions.

    Bogle has credibility. He's got a lot of empirical data to suggest the overwhelming majority of active investors can't outperform indexing on an ongoing basis.

    To those who are exceedingly gifted, go the spoils of the calculated arbitrage inefficiencies.
  9. piezoe


    In the "Four Pillars of Investing," McGraw Hill, 2002, William Bernstein points out that the historical real return (inflation corrected) from equities is 7% , however the return for any particular 30 year period may be much different. As an example he cites (page 231) the period 1966-1995. During the 17 years period 1966-1982 the real return of the S&P 500 was zero! Then from 1983 to 1995 it was, in his words, "spectacular". And that made the real return for 1966-1995 equal to 5.3%. He also presents, elsewhere, a cogent argument for lower real return in the future than in the past. As traders, or even as individual investors, we should have an excellent chance to best these figures. The trade-off of course is the investment of our time. Bernstein argues that picking individual stocks is futile, and that might be true on average, but as we know, there is a very large difference between either trading or investment performance of individuals.