Posts filed under “Index/ETFs”

Active Fund Winners? Emerging Markets Small-Cap Funds

Twice a year, S&P releases a “SPIVA Scorecard” – a report comparing the performance of Active Managers versus three passive indices. The S&P 500 large caps, S&P MidCap 400, and S&P SmallCap 600 are pitted against the median returns of active managers.

In the most recent report, the trailing 12 months returns for these indices were 20.60%, 25.18% and 25.18%, respectively (latest data is as of June 30, 2013).

Gains in major the indices were not duplicated by the universe of actively-managed funds. As is typical, most active managers underperformed their respective benchmarks. S&P notes that “59.58% of large-cap funds, 68.88% of mid-cap funds and 64.27% of small-cap funds underperformed their respective benchmark indices” over the trailing 12 months. Performance of active managers were equally unfavorable over three- and five- year periods. Most International equity did no better.

The three-year data is especially damning: In the universe of “All Domestic Equity Funds,” 78.90 percent were outperformed by the S&P Composite 1500. Active managers did better over five years, with 72.14 percent being outperformed.

Three kinds of funds did especially poorly over three years: Large-Cap Growth Funds (active outperformed by passive in 92.11 percent of the funds), Mid-Cap Growth Funds (passive outperformed 92.86 percent) and Real Estate Funds (a whopping 95.07 percent outperformance).

The one notable bright spot among active managers: Emerging markets small-cap funds. They have outperformed for a number of years. That suggests that managers can find Alpha by fishing in waters where there are fewer commercial vessels with trawling nets at work.

The SPIVA Scorecard tends to show much worse performance than other active versus passive studies. My knee-jerk inclination was to assume S&P, a purveyor of passive indexes, was biased. However, a closer look at their statistical work shows they are correcting for biases that typical comparisons omit.

The biggest correction appears to be for Survivorship bias. S&P corrects for those funds that were liquidated (or merged) over the course of a year. Studies that fail to account for funds that close will boost the apparent returns of the set of active managers. Accounting for the entire set of active managers — not just those that succeed and survive — eliminates survivorship bias.

The data strongly shows the advantages of passive indexing. Where many people misinterpret it is in assuming that it means there is no role of active management. That’s the wrong interpretation. There is a place in portfolios for active managers — but it’s probably a smaller slice of holdings than many investors have currently.


S&P Indices Versus Active Funds (SPIVA) Scorecard Mid-Year 2013

Category: Apprenticed Investor, Index/ETFs, Investing

Invest As If The Sun Is Coming Up Tomorrow

I did a long interview with Forbes, we discuss some investing themes and ideas: “Here’s the thing I think most people have a hard time understanding and putting into context. To say stocks are cheap or expensive today is to simultaneously discuss two different things. The first is future earnings power. So the real question…Read More

Category: Index/ETFs, Investing, Psychology

S&P500 % Change Relative to Government Shutdown

S&P 500 (% Change from Government Shutdown Start) Source: Chart of the Day

Category: Index/ETFs, Markets

Stock Market Since 1900

Click to enlarge Source: J.P. Morgan

Category: Index/ETFs

128 Years of Dow Components

Want to know what has been in the Dow Jones Industrials over the past century and change? Click thru for an interactive chart that shows the full history of the Grandpappy all of indexes. 128 years of the Dow — what’s in and what’s out click for interactive chart Source: CNNMoney Hat tip Tal Yellin

Category: Digital Media, Index/ETFs, Markets

Drivers of the Dow

click for interactive version Source: WSJ     Nice graphic and article explaining how only 5 stocks (of 30) in the Dow are the prime drivers of the rally, responsible for one third of the gains. Before you go Oooh, consider the simple math of this. If every stock contributed equally to the Dow’s rise,…Read More

Category: Index/ETFs, Markets

QQQE: Equal Weight Nasdaq

Traditional QQQ Weighting click for larger graphic Source: Nasdaq   Long overdue and excellent idea: Part of the problem with the Nasdaq QQQ’s has bee on the oversize weighting of a few giant market names in it. Certainly Apple (AAPL), but also Microsoft (MSFT), Google (GOOG) and others. Note that chart above dates from 12/31/2012…Read More

Category: Index/ETFs, Technology

History Of The S&P 500′s Biggest Components

More looks from various decades of the the top 10 S&P500 caps.


Click for Complete History

More charts after the jump

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Category: Digital Media, Index/ETFs, Valuation

U.S. Equity Sector ETF Weekly Performance

  The Relative Strength Index (RSI) is a momentum oscillator that measures the speed and change of price moves. The RSI moves between zero and 100 and is considered overbought with a reading above 70 and oversold when below 30.  Note the RSI can sustain an overbought (oversold) reading in a strong up (down) trend….Read More

Category: Index/ETFs, Think Tank

Simplifying Your Investment Strategy


My Sunday Washington Post Business Section column is out. This morning, we look at the advantages of avoiding complexity in your investment process. The print version had the simple headline Simplifying Your Investment Strategy while the online version used the hedder Keep it simple, avoid the pitfalls.

There are know advantages to certain complex investing strategies, but these complexities become harmful disadvantages most of the times, as Humans are emotionally unable to follow them.

By creating an investment plan that is simple and easy to follow, you make it more likely that you will ultimately succeed and reach your goals. Hence, all of the familiar themes get mentioned in my focus on simplicity: ETFs, lower costs, diversification, rebalancing, dollar cost averaging, etc.

Here’s an excerpt from the column:

We must recognize our own behavioral errors. To be blunt, you are not likely to become a cognitive Zen master anytime soon. But a little enlightenment could keep you from making some common investing errors.

Knowing these limitations, we can design an investment plan to circumvent the behavioral pitfalls. And a good step is to simplify. Toward that end, keep these 10 ideas in mind when approaching your portfolio”

The 10 ideas are not groundbreaking — but they are often overlooked.

Less can be more.


Keep it simple, avoid the pitfalls
Barry Ritholtz
Washington Post, January 25 2013

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Category: Apprenticed Investor, Index/ETFs, Investing, Rules