Why do mutual funds get such a bad rap on here?

[SMB]

Redd,

The index funds don't track the underlying indices on a complete 1:1 basis (that is, they aren't an identical mirror). They'll buy and sell out of individual components where appropriate, and correct to the index at different times.

[Sniper]

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So why are so many of the index funds that OP mentioned doing so much better than the market averages? Am I misreading something?

[/ QUOTE ]

The list is of Mutual Funds, not Index Funds!

[rockrock]

Owl,

You cannot broadly compare a mutual fund to the S&P or dow. For example, some of the funds you list may many hold mid-caps (which killed S&P), small caps, etc.

Different asset classes performed better or worse than the benchmarks you listed.

It isn't a fair comparison because I can list several asset classes that outperformed the funds you listed.

[Redd]

[ QUOTE ]
[ QUOTE ]
So why are so many of the index funds that OP mentioned doing so much better than the market averages? Am I misreading something?

[/ QUOTE ]

The list is of Mutual Funds, not Index Funds!

[/ QUOTE ]

What about the ones like [ QUOTE ]
Vanguard 500 Index;Inv 4.77%

[/ QUOTE ]?

[RocketManJames]

[ QUOTE ]
So why are so many of the index funds that OP mentioned doing so much better than the market averages? Am I misreading something?

[/ QUOTE ]

This is an important point.

This is something we should all be aware of when comparing to a benchmark index... Total Return vs Index Return.

It is true that the S&P 500 this year is up 3.00%. But, the Total Return of the S&P 500 this year is up 4.91% once you factor in dividend reinvestment.

The Dow is negative this year, but if you factor in the dividends you still would have made money if you were invested identically to the Dow 30.

We should all be comparing performance against the Total Return of an index and not just what the number tells you.

The truth is that the 25 funds listed haven't done as well as the OP said. Also, it is expected that index funds should underperform their indexes due to their fees and costs. Finally, I'm not knocking mutual funds... you just have to be careful in selecting them, and you should also be comparing them against Total Return (okay, I'll stop beating a dead horse).

Hope this helps...

-RMJ

[RocketManJames]

[ QUOTE ]
Redd,

The index funds don't track the underlying indices on a complete 1:1 basis (that is, they aren't an identical mirror). They'll buy and sell out of individual components where appropriate, and correct to the index at different times.

[/ QUOTE ]

While this is true, this difference should not be large enough to cause a nearly 2% difference in return. If it does, then they are doing a very poor job of mimicking the return of their respective index.

The bulk of the differences has to do with dividend reinvestment.

-RMJ

[krishan]

Capital World Growth and Income Fund (CWGIX) report.

Morningstar ranks this fund against MSCI EAFE NDTR_D (whatever that is)

CWGIX beat the index over X years by Y amount

1 - 1.18
3 - 0.29
5 - 6.39
10 - 7.88

The past year overall performance was 14.72 as reported by Uglyowl. Clearly we can't compare this to the S&P but it did beat it's comparable index by a bit as well.

Krishan

[krishan]

[ QUOTE ]

The bulk of the differences has to do with dividend reinvestment.

-RMJ

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Can you explain futher? Is there a way to compare say AMCPX against the S&P while taking into account dividend reinvestment? It seems like a readily available mechanism for comparing these things should already exist.



This graph compare AMCPX against the S&P. Does this include divident reinvestment bias or does it take that into account for the S&P and AMCPX? Thanks,

Krishan

[Sniper]

Don't forget that the fund also declared dividends and capital gain distributions!

[krishan]

[ QUOTE ]
Don't forget that the fund also declared dividends and capital gain distributions!

[/ QUOTE ]

I'm afraid I can't understand you. [img]/images/graemlins/frown.gif[/img] I guess I should read a basic investing book to understand the terminology.

Okay, so the fund gives dividends. Those dividends are reinvested in the fund. Doe the graph of the fund reflect that?

The S&P companies also give dividends. I can't imagine the graph of the S&P reflects reinvested dividends correct?

So is there a way to compare 1000 $ of CWGIX invested 10 years ago with all gains reinvested against the S&P with all gain reinvested?

Basically trying to come up with an apples to apples comparison between a Mutual fund and the S&P (or corresponding index)

Krishan