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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: Uncle Frank who wrote (49705)	1/5/2002 5:28:29 PM
From: Jurgis Bekepuris	Read Replies (2) \| Respond to of 54805

UF, "Indexing not best". I may have mentioned this before. Most people use the "80% funds don't match index" argument. I am not sure why people don't invest in the remaining 20%. It's not that difficult. ;-) E.g. Sequoia and BRK, which was more a "mutual fund" in the early years than now, come to my mind. There are other more recent examples. E.g. Legg Mason Value Trust has just beaten S&P for 11th straight year. Maybe Bill Miller can do it? There are couple other issues at this time: 1. If Buffett is right and market overall will go up only 6-7% for the next 10 years, the possible managed funds edge over index may become even more important. Counter argument: so will the management fees. 2. The anecdotal increasing market volatility may benefit active managers vs. indexers. I don't have any data to support this. 3. In the last 2-3 years, the S&P was trounced by a lot of managers, especially in the value category. Counter argument: this trend may be ending now, so S&P should be more attractive than managed value. Another counter argument: in previous recessions value fell more than S&P. 4. Even if you index, what index should you use? S&P? QQQ? HHH? Whole market? Russel 2K? Morgan-Stanley International? Vanguard Small-Cap Value? There is nothing magical about S&P that guarantees that it is THE BEST index. It is quite possible that international indices that were severely lagging for recent years will outperform S&P. Or maybe not. Just some thoughts Jurgis - who's not so comfortable sleeping with S&P in his portfolio