Lynch, 77, told Bloomberg that the wholesale move of investors in recent decades from actively managed mutual funds to passive investing — that is, index funds — is “a mistake.”
Magellan lost that crown in 2000 to Vanguard’s S&P Index Fund, the quintessential passively managed mutual fund. The record isn’t any less dismal over longer periods. More than 67% of actively managed U.S. equity funds underperformed the S&P Composite 1500 index, which comprises 90% of all U.S. publicly traded companies, over three years; 72.8% of funds fell short over five years, 83.2% fell short over 10 years and 86% over 20 years.A cryptocurrency company thinks it will get a boost from putting its name on the Lakers’ arena. History begs to differ.
That model was upended in 1976 by John C. Bogle, who introduced the first index fund at Vanguard, which he founded. Bogle felt that the best way to serve small investors was to offer them low-cost funds tied to broad market indices. The taxable distributions of Vanguard’s S&P 500 index fund in the first two quarters of this year came to about .65% per share; Magellan’s last capital gain distribution in May was the equivalent of 4.75% of its share price.
But even Magellan failed to match the S&P 500 in two of Lynch’s 13 years at the helm, though he never had a down year; the S&P 500 had two negative years during his tenure.The GameStop frenzy recalls stock market manias of the past. They all end in tears. This leads to concerns that passive investors and their managers have no incentive — indeed, little ability — to leverage their shareholdings to influence corporate behavior.
Passive investing is still a key component of diversified portfolio construction , but active management should also play a role in asset allocation approaches.
A 5th grader in my sons class told me to plow my savings into crypto, should I do it or ignore the noise? Don’t want to miss out on this once in a lifetime opportunity
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