In fact, 2017 performance figures for active funds across a range of
investing categories show just how difficult beating the market can be,
even for the pros. In only one category – international equity – did half
of funds available for sale in Canada outperform their benchmarks. The vast
majority of funds in all other categories underperformed.
Extending our examination to 10 years doesn’t give active funds an
advantage. The percentage of underperforming funds over that period is just
Why can’t the professionals beat the market consistently? Plain and simple,
investing is challenging. “The market” includes all investors, so the pros
need to be better than the competition.
But a critical factor to investing successfully is assessing the effect of
costs. Active managers’ expenses for research and transactions leave less
margin to beat the market – and less money to pass along to investors. The
more a fund charges in fees, the greater it must outperform the market just
to break even.
What’s an individual investor to do? If you can’t beat the market, why not
embrace its return? Index funds seek to track a given market or market
segment, rather than pick its winners and losers. So investors receive the
market’s return minus costs, which for index funds are typically far less
than for active funds.
Beating the market is difficult. Being a smart investor can be quite easy!
is head of product for
Vanguard Investments Canada Inc.
He joined the Vanguard organization in 2000 and has held roles in the
United States and the United Kingdom, working with Vanguard’s global
ETF platforms for nearly a decade. Most recently, Mr. Huver was
Vanguard’s head of product management in Europe. He supported the
establishment of Vanguard’s ETF platform there and managed the launch
of Vanguard’s first European ETFs. Previously, as a member of
Vanguard’s U.S. ETF Product Management team, he coordinated launches
and provided capital markets support for ETF trading.
Mr. Huver earned a BS in marketing from Saint Joseph’s University and
holds a number of U.S. investment licences.
Notes and Disclaimer
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article first appeared on the
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The views expressed in this material are based on the author's assessment
as of the first publication date (September 2018), are subject to change
without notice and may not represent the views and/or opinions of Vanguard
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Please consult your financial and/or tax advisor for financial and/or tax
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