That's no small feat, given the consistent underperformance of actively managed funds in general.
The lack of performance persistence in actively managed funds makes this a poor method of selection.
But investors should also consider including some actively managed funds in the portfolio, says Malkiel.
The difference between these particular actively managed funds and the inactive alternatives is 1.22% a year.
Actively managed funds should have a low R-squared, because portfolio managers are supposedly paid to make index-beating bets.
WSJ: Upside: How to Find a Fund Manager Who Can Beat the Market
Index funds usually have the lowest expenses and turnover and typically outperform actively managed funds that are similarly invested.
Of course, actively managed funds have yet to gain any traction with investors.
There are many differences that set active ETFs apart from actively managed funds.
Actively managed funds are getting a lot of competition these days from passive vehicles like index funds and exchange- traded funds.
If you own stock mutual funds, particularly actively managed funds, look at the returns relative to those of their category peers.
Most of these are actively managed funds where managers attempt to outperform a benchmark by selling winners to lock in gains.
For domestic actively managed funds the (unweighted) average annual expense ratio has dipped from 1.56% of assets in 2003 to 1.45% today.
Fidelity Magellan, one of the best-known actively managed funds in the country, sold more than 155, 000 shares, or 17% of its stake.
Management fees for most of the bigger ETFs range from 0.7% to 0.25% of assets, versus 1% or more for actively managed funds.
No, the money is in getting naive customers to buy into actively managed funds where they pay as much in fess as possible.
FORBES: Too Big To Fail Banks Turn To Ma And Pa Investor To Make A Buck
William McNabb, Vanguard's chief executive, said he isn't sure whether Vanguard will carry the ETF shares concept over to its big actively managed funds.
Sharpe, the Stanford finance professor who devised the widely used Sharpe Ratio for measuring investment risk, recently took another looked at actively managed funds.
With bond funds, the link was so weak that the relatively high expenses charged by actively managed funds overwhelmed the value of their modest outperformance.
On the other hand, many financial advisers argue that actively managed funds rarely generate strong enough returns to justify the fees that the fund companies charge.
WSJ: Investors Buying Dividend Stocks for Income Are Taking On a Lot of Risk.
Mr. Keffer says that while he generally doesn't like actively managed funds, the Vanguard fund's balanced mix of assets and low expense ratio make it attractive.
Bogle says that taxes, fees and trading costs eat away one to two percentage points a year of the taxable assets parked in actively managed funds.
That group includes such actively managed funds as the Vanguard International Growth Fund (FORBES grades: B and B) and most index funds (that is including exchange-traded funds).
What's more, you can buy index funds that are almost certainly going to perform better than actively managed funds over the long run and cost 95% less.
He recommended mostly index funds, with some low-expense actively managed funds, and a solidly diversified portfolio that is rebalanced every year to stay in line with her ideal allocation.
FORBES: Lessons I Learned from Interviewing Over A Thousand Financial Planners
Investment advisors stear people into actively managed funds because as noted in (2), that is what makes sense to their clients and because they can get better fees that way.
The expense ratio of the IWD, for example, is 0.2%, compared to fees for actively managed funds that routinely have expense ratios four or five times those of an ETF.
Though the new research seems to give investors an edge in finding good actively managed funds, don't forget that the most proven indicator of future returns continues to be low fees.
Companies like JP Morgan and Goldman Sachs will likely end up coming out with actively managed funds or those that do things like short sectors in order to compete, he said.
Actively managed funds recorded their biggest inflows since 2000.
应用推荐