Frank, Truth be told, it's a prejudice. Since I worked as a money manager for a score of years, I have a disdain for investing by the numbers. However, I will be the first to tell you that in up markets, indices usually outperform the average money manager. Of course, the reason is that money managers ARE the average, and as a group, they cannot beat the average. And nobody says you have to hire an average money manager.
However, nowadays, most money managers are below average and would have horrible results if left to their own devices. They are business school shake and bakes. The only way they approach average performance is by closet indexing. So, for the typical investor who does not know a quality manager, indexing in an up market makes sense. In a down market, it is death on a stick. But we haven't had one of those for a long time.
MB |
