SPIVA 2023: Did Actively Managed Funds FINALLY Beat Index Funds?

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S&P Global released its SPIVA (S&P Index vs. Actively Managed Funds) report for 2023. In this video we'll look at how actively managed funds performed against their benchmarks. We'll also look at some famous actively managed funds and compare them to index funds. And then we'll look at why actively managed funds can't seem to keep pace with a simple index fund.
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Timestamps
0:00 - Welcome to the Financial Freedom Show!
1:44 - SPIVA U.S. Year-End 2023
6:48 - Persistence Scorecard
9:35 - Fidelity Contrafund (FCNTX)
11:12 - Portfolio Visualizer
11:54 - AGTHX
13:14 - Comparing two or more results
16:25 - Jack Bogle's article
20:06 - Actively Managed vs Index Funds
#retirement #investing #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
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Опубликовано:

19 июн 2024

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Комментарии : 123

@tammystut 3 месяца назад

I enjoyed this content. Although I have been watching less yt and doing more research. My retirement contributions are not making my 401k any better, should I buy popular index funds in a brokerage account, is this a better alternative to outperform and rebuild my retirement?

@patrickjones1392 3 месяца назад

My suggestion to any investor old or new is to get a mentor and don’t just go buying stocks without proper considerations. Most of what is pumped out by the media is what most RU-vid ‘fin-entertainers’ churn out to you as fear uncertainty and doubt.

@rosalopez5574 3 месяца назад

Agreed. That nd reading some basic principles laid out in books like The Intelligent Investor by Benjamin Graham. Thereare also good YTubers out there like Felix, Graham Stephan, Humphrey Yang and a few others, but generally you re right.

@Dividendflywheel 2 месяца назад

DCA into a low cost total stock market index. Aim to invest 20% of your gross income. It takes about 15 to 20 years of disciplined consistent investing before you see the results. The HONEST (counter intuitive) truth is this is the surest path to achieving superior returns in the stock market.

@s55b 3 месяца назад

Great video. Thanks, I’ve been interested in finding information in this area.

@Yette 3 месяца назад

Gave up Fidelity Contra more than 5 years ago. In general, the fund growth was strong, but the tax consequences were significant with capital gains

@bklynbass 3 месяца назад

Put actively managed funds with high turnover rates like Contra into tax advantaged accounts like 401ks or IRAs and the capital gains won't be an issue. For taxable brokerage accounts use index funds which have low tun over and therefore less capital gains.

@Dividendflywheel 3 месяца назад

SPIVA report. Keeps everyone honest. We need a product like that for annuities 😊.

@Chris_Heather_livingbestlife 3 месяца назад

Excellent and informative video. Validates my low cost index fund approach.

@Dividendflywheel 3 месяца назад

Boglehead?

@davidbundesen5867 3 месяца назад

Rob, this is a very informative video. More I watch your channel, the more I like it. I am one of those investors that keeps trying to beat the indexes. And of course, I never do. I don’t know why I keep trying. The portfolio visualizer is something I’ve been using for quite a while. It’s really useful. But I’ve ended up doing (and portfolio visualizer confirms this) yes I’ve ended up with vanguard Wellington. And this one actually does beat the portfolio over time. Now I just need to stick with it

@mgl_rosls 2 месяца назад

I fell for that trap we all have!

@michaelevans5328 3 месяца назад

Nice job, Rob. It is a really good feeling to be 100% content with one’s index portfolio. No FOMO. No urge to tinker. Much more challenging financial questions than fund selection.

@jmc8076 3 месяца назад

Nice! Just took over from last advisor (retired) 6 mths ago and trialing DIY. Still reworking but getting there w/lots of research incl books and Rob/Ben Felix videos. Looking fwd to great apps Rob uses being avail in Canada. PS: not new to investing but your post was good reminder of our goal. Thx

@michaelevans5328 3 месяца назад

@@jmc8076 It took me two years of watching and reading to get comfortable, and I'm still learning. I thought Mike Piper's Can I Retire? and Bill Bernstein's Four Pillars of Investing were great for advanced beginners. I think Rob, Piper, Bernstein, and Allan Roth are my favorite teachers. If all four agree on something, I feel pretty good ;) Not exactly a diverse group, however.

@evanwheeler7687 3 месяца назад

@@jmc8076You're doing very well if you're following Ben Felix and The Rational Reminder Podcast.

@barrettthompson5741 2 месяца назад

Calm, reasoned, & performant... Rob makes a great case for index funds. I found this channel at exactly the right time!

@josh9231 3 месяца назад

Great video Rob, it’s good now and then to get a reminder of why we invest in index funds 👍

@DavidDittemore 3 месяца назад

Segway to a bond question. I'm halfway through your extremely informative segment on intros to bonds from two years ago. I'm in the BND ETF and went to look up what my expected LT returns may be in that fund based upon your rule of thumb reference to take the yield * ((Maturity in years * 2) -1). My question is whether the yield to consider is the TTM yield (3.19% per e-trade) or the annualized SEC 30 day yield (4.53%), a significant difference. Thanks so much for all you do, love the content.

@Omar-et7sb 3 месяца назад

Rob is a gift to the rational personal finance community!

@2023Red 3 месяца назад

Excellent work Rob. I invest and trade ETFs plus options alot. But not actively managed funds. Just QQQ, SPY, and DIA. I have to say that it is very hard to beat them. It is one reason I had to disagree with your earlier video on dividend stocks. It is total return using options that make the real payoff.

@evanwheeler7687 3 месяца назад

Try out QQQM or VGT if you want US tech with lower fees than QQQ.

@JimDeVerna-yf2zy 3 месяца назад

Well Done!!

@Kimmer 3 месяца назад

Rob, Vanguard claims that some of their actively managed funds available to advisory clients outperform their index funds over long periods of time. Have you seen evidence of that or is the data being tweaked to claim that?

@mrmistmonster 3 месяца назад

I think the portfolio visualizer doesn't apply fees iirc

@perfectlymprfct 3 месяца назад

Thank you. 💌

@davidwylie796 3 месяца назад

Thanks for the data. Please compare the growth funds to QQQ.

@Dividendflywheel 3 месяца назад

You can use portfolio visualizer (free tool)

@ArthurDentZaphodBeeb 3 месяца назад

Fantastic overview. Every adult in America should watch this.

@DF-by7gy 2 месяца назад

Could you please speak about health insurance approaches for retirees under 65? Thank you.

@barkingshark6413 3 месяца назад

Your thoughts on FREC ? …..

@jaymetheaccountant 3 месяца назад

First to class! Enjoyed the content today Rob - great topic.

@pareshjoshi5113 3 месяца назад

One of the actively managed fund manager made a comment that they can use Equity Hedge and Dynamic Bond strategy to avoid year 2022 situation where both stock and bond are down. Can anyone help me to understand what funds they may use for equity hedge and dynamic bond strategies?

@jackspencer8290 3 месяца назад

Any way you cut it, index funds consistently outperform actively managed funds over any kind of long term.

@depreciatingasset 3 месяца назад

Can you compare FMILX fidelity millenium

@Toomanydays 3 месяца назад

I have some of that. Wish I didn’t.

@rgarri6396 3 месяца назад

In the old days fidelity contra fund was a contrarian fund, they bought stocks that were out of favor and had growth potential. When you look at the top holdings it’s all the high flyers so don’t believe for a minute it a contrarian fund. I believe a high percentage of managers chase the big seven! Great idea if your a fund manager,most in the index and 20% in high flyers. The cost hurts the return also.

@dwood6285 3 месяца назад

one interesting outlying number from the SPIVA report displayed in this video is that for 2023, active large cap growth funds did really well against the index...only about 10% underperformed. compared to results of other fund categories, it looks like a typo.

@pomme4moi 3 месяца назад

Great video. One observation. Very few invest a large sum at the beginning of a period, adding no additional dollars during a period. Most of us start with a small sum, then add to it each month. IMHO the latter approach should be used for fund comparisons.

@jmc8076 3 месяца назад

I think it may depend on demographic. Prob true for majority below certain age. Also millions close to/just retiring maybe doing lump sums? Actual stats per country prob avail. Edit: 2024 ‘record-breaking year for retirement’ in U.S., with avg 11,000 a day to celebrate their 65th. (CBS news)

@leegonzalestx 3 месяца назад

depends on how long you've been investing. the longer term investors may change to cheaper funds etc and end up investing in bulk

@mskuriscak 2 месяца назад

I agree. and typically it usually will work in the indexes favor even more so. if you are running a test on a fund its likely the reason you are is because of its past success (contrafund in this example) but mutual fund alpha tends to diminish as it takes on aum and begins to resemble a closet index fund. In the case of the VUG/Contrafund, VUG actually BEATs it over that period with continual investment.

@FlagstaffChief 3 месяца назад

Does the comparison over many years take survivor bias into account? That is both a statistical and real life advantage for index funds. 4:23

@Dividendflywheel 3 месяца назад

Active managers do everything possible to achieve superior returns. Including chasing performance towards the end of the year. And erasing the poor performance of exceptionally bad funds. By merging them into better funds 😊 And the performance history only reflects the better performing funds.

@Austin-fc5gs 3 месяца назад

Would someone be able to make an index fund that buys and holds active funds?

@evanwheeler7687 3 месяца назад

There are absolutely funds of funds. Two good examples in the factor investing space would be Avantis' AVGE and AVGV, which are one fund options for people who want global diversification with a factor tilt. Plus they're cheap considering their strategies and in comparison to other actively managed funds.

@Dividendflywheel 3 месяца назад

@@evanwheeler7687 I respect the folks at Avantis (most of them came from Dimensional Funds). I am long AUVU

@pomme4moi 3 месяца назад

I wish we had access to the methodology the lies behind the SPIVA report. I’d like to know, for example, how SPIVA classifies individual funds. For instance, is AVUV an active fund?

@janc.8197 3 месяца назад

Look up the fund on your brokerage site and you can see under Composition that it is an actively managed fund.

@pomme4moi 3 месяца назад

Thank you, but that was just one example. I have many questions above the SPIVA methodology.

@evanwheeler7687 3 месяца назад

I have a significant position in AVUV and it is indeed an actively managed fund, however, this is fine if you're a believer in the evidence behind factor investing and Avantis's methodology.

@drivenforex4088 3 месяца назад

Just add the 3 moving average on your index fund chart. Every time is below the 200 moving average, you sell and do the opposite for buy. Always remember when the FED cut rate means the money machine will be on. Start buying as much as possible. Buy low sell high.

@likethesky 3 месяца назад

@Rob Berger, since you brought up Warren Buffett…(!!), what index would you compare BRK to and over what period? I’m thinking large cap value index of some kind, and over the past 20-30 years. Would be a great add-on to this video, though it might **not** prove your point! ☺️ it might though, which would make it (even more) interesting… and yes, I’ve heard about his bet with hedge funds.

@Dividendflywheel 3 месяца назад

In some cases BerkshireHathaway operates like private equity. In others it acts like a pay-day lender to desperate corporations. BerkshireHathaway also has “permanent capital” in the form of insurance Float. This is a tremendous advantage. The cost of this capital is almost free. You also have the advantage that the redemption of shares by investors doesn’t create a taxable event for other investors. Finally the Fund manager (if we call Buffett that) works for free. 😊😊😊 Buffett was an instinctive value investor. But I think Charlie nudged him towards the growth side of the spectrum. Having said all that BerkshireHathaway owns 77 subsidiaries and 40 publicly traded stocks. Those 114 businesses make it more diversified than most mutual funds.

@doncooper2344 3 месяца назад

Warren Buffet has explained why the index funds will outperform actively managed funds (he used hedge funds but same analysis). By definition, an index fund should get the average return of the actively managed funds. That should mean they are equal. However, actively managed funds have higher fees. For the index funds the return should be "Average Return - Low Fees". For the actively managed funds the return should be "Average Return - High Fees". Very difficult for an actively managed fund to beat the averages and make up for the higher fees, especially over longer periods of time.

@doncooper2344 3 месяца назад

@@lesbolstad Thank you. It is obvious. Totally obvious. Which leads to the questions: why do people ask about it and why do we need a video about it? LOL

@Juangalt 3 месяца назад

Why would an index fund get the average return of the actively managed funds by definition? Sure, it may be approximate to the index fund but you are assuming there's no bias among active managers when you make that statement.

@Dividendflywheel 3 месяца назад

@@Juangalt index funds get the result the market gives (minus slight tracking error and low fees). Active managers have a potential to over perform or under performed to the degree to which they overweight stocks that lead the market in the preceding periods (minus fees). However the ability to overperform over longer periods become increasingly difficult because of the compounding effect of fees and errors in security selection that plagues all mortals😊😊

@Dividendflywheel 3 месяца назад

Mr Munger nailed this flaw in a lecture titled the psychology of human misjudgment.

@GeekProdigyGuy 2 месяца назад

@@Juangaltwhatever the active managers do, the market will reflect it. they buy a stock, the stock price goes up, and the index fund now weights that stock higher.

@buyerclub2 3 месяца назад

I watched about 2/3 before I added this comment. First, an interesting video. But I guess the thing that I keep asking is why does some one look at this as an either or situation. I actually have both the S&P500 Index and FCNTX as my two largest positions. As you explained some years, like this year, FCNTX might beat the index other years no. But no issue holding both. I will tell you, where you put funds may matter more. Because FCNTX does not focus on reducing the tax consequence of the investment. And some years, both their LTCG and even STCG can be huge. (Last year as an example). so while I do recognize, how difficult it is for managed funds to beat their index. FCNTX, and its sister fund FMAGX are low cost managed funds that I have been happy to hold in my portfolio over 30 years. But of course no issue investing in SPY either

@wacoharder 3 месяца назад

Great stuff! Thanks

@roflorida1 3 месяца назад

If VUG only pays small dividends, for example, why not just buy and hold individual high dividend stocks? A correction can wipe out your "savings" in your VUG portfolio. Tell me differently, please.

@sd0753 3 месяца назад

Diversity is the key. VUG is a fund with 208 stocks in it. When a correction hits it will be affected. With individual stocks you might buy the stock that doesn't go down at all during the next correction or you could buy the stock that goes bankrupt. It's safer to buy the fund.

@evanwheeler7687 3 месяца назад

Total return is all that matters, dividends do not matter. Where do you think the capital to pay the dividend comes from? The company's bottom line, which reduces its overall value by the same amount. You regain the value in your position if you reinvest the dividend through DRIP. You're basically a value investor with less diversification than you'd otherwise have if instead you disregarded dividends and held more companies regardless of dividend status.

@1jet55 3 месяца назад

FBGRX has been around going on 40 yrs but the last decade or so under new leader, any thoughts as to the person or people heading the funds if actively managed as this one has blown the doors off most? And as always thanks for the clips and Monday nights with rob, love the content and material to provoke the mind.

@missouri6014 3 месяца назад

This is been a great fund for me for a number of years and consistently beats the more well advertised, active gross funds and it beats any index fun out there

@janc.8197 3 месяца назад

@@missouri6014 We used to have it, too, and agree that it is a very good fund. But QQQ (Nasdaq 100 index fund) has beat it over the last 3, 5, and 10 year periods, as well as over 24 years since the inception of QQQ in April 1999 according to portfolio visualizer.

@mskuriscak 2 месяца назад

FBGRX skirts the line between diversified and non diversified. its twice the market allocation in Mag7. Thus its risk level is through the roof. Which has largely worked the past decade. but as you noted it underperformed its index from inception to around 2014-2015ish until new management. a friend of mine worked for a fidelity office back then and told me they were telling a lot of people to buy FBGRX and get out of another large growth fund that was the fund that was competing with contrafund. the thing though is its underperformed its index and the sp500 on the 3 year. who knows what the next 3 years holds.

@tankeryanker4671 3 месяца назад

Awesome video Rob 🎉

@erniedavis7217 3 месяца назад

Great info!

@JasperSchneider 3 месяца назад

I think the conclusion that passive beats managed is somewhat misleading, given that in your own demonstration Contra outperformed VUG. Granted, when you took off the first year (cherry picked), it showed otherwise. Overall agree on keeping expenses low, but I also sometimes wonder if passive has performed so well because we have generally been in good markets for 20 years? (with a few bear periods). Perhaps active can re-tool better in a down market, and why we are seeing active out-perform this past year coming off of 2022. While most of my holdings are passive index, I have also adopted a diversity approach of holding some percentage of actively managed as well. For example, if my asset allocation called for 30% growth assets, I may do 20% VUG and 10% Contra. Overly complicated and redundant? Perhaps, but I'm also wired to believe smart people can do good things. At least it gives me some sense of having control, especially in those down markets to take advantage of buying opportunities that passive funds simply can not do.

@70qq 3 месяца назад

🤘🏻

@BornAgainBride 2 месяца назад

Unrelated question re: International investing: Any thoughts on investing in ETFs (like MSCI BKF?) that invest in BRICS? Seems like this economic alliance is thriving. As Wikipedia puts it, "The BRICS countries are considered the foremost geopolitical rival to the G7 bloc of leading advanced economies..."

@DF-by7gy 2 месяца назад

Interested in your thoughts on crypto and gold as part of retirement portfolio in this inflationary environment?

@CaptainBenjamins 3 месяца назад

Long story short - VOO and chill

@JosephDickson 3 месяца назад

Longer story, VT and chill 😂

@sarashann 3 месяца назад

Also longtime VOO'er. 80% VOO, 20% VGSH. I sleep well at night. 😊

@sunnyBLR 3 месяца назад

Ok , what i learn is that both active and index tend to normalize to each other so the strategy that might work is: invest 50 50 in index n active ETF. Every February, move money from over to to underperformer. Timing will be hard so i picked Feb arbitrarily. The fund that underperformed the previous will more likely outperform during the next. Any thoughts?

@aaront936 3 месяца назад

You'd be better off flipping a coin

@evanwheeler7687 3 месяца назад

"The fund that underperformed the previous will more likely outperform the next." Based on what? Why does the underperformer have to come back and outperform at some future date? Seems like the gamblers fallacy to me. "I haven't won in a while, therefore I'm due a win soon."

@chriscamburn 3 месяца назад

Wow - both VUG and FCNTX Beat the S&P 500! Should we sell our SP500 Funds to buy these?

@et_phonehome_2822 3 месяца назад

Too bad there were no reporting as to which index fund is consistent.

@robertbennett212 2 месяца назад

I have a Schwab brokerage account. Within that Roth 401k, I have 50% in PFLD and 50% in SCHO. The performance of PFLD has been mediocre. I was thinking moving both of them to a Federal treasury money market fund. What’s a good choice within Schwab? I am 73 y.o. Thanks, RB

@p.c.h.6721 3 месяца назад

So, would it be better to buy an S&P ETF than to buy Berkshire Hathaway?

@robinsareolas 3 месяца назад

I would say yes, I’m in VTI and BRKB and up +20.57% and +22.89% respectively over the past 13 months. My stake in BRKB is significantly less than VTI but it has outperformed, although not by too much.

@p.c.h.6721 3 месяца назад

@robinsareolas BRKB has done so well since it went down during 2022. I believe I saw BRKA at $400K back in October of 2022, it's now at $600K! That's not sustainable in my opinion.

@sarashann 3 месяца назад

I'm longtime VOO ETF buy and hold. I've been very happy with its performance.

@ccrider8483 3 месяца назад

Like many others I have to wonder if BRK's performance will suffer when Warren B is no longer around?

@jmc8076 3 месяца назад

Both? SP500 or total stock market funds incl pure growth cos and a few sml caps. BRK is more solid value. Avg slower growth but also very low chance of dropping too much during volatile times. Like WMT.

@josh9231 3 месяца назад

Rob, I think maybe you forgot to mention that the reason it’s so hard to pick funds that outperform year after year, is that in the percentage that underperformed last year there’s only a fraction that beat the benchmark the year before. Thus cumulatively, in 5 to 10 years the number that outperformed was extremely small. Now, how are you going to pick those 2 or 3 funds without the benefit of hindsight?

@evanwheeler7687 3 месяца назад

You don't, that's why you invest in broadly diversified, cheap index funds that beat the active managers over the long haul, e.g. VTI.

@Dividendflywheel 3 месяца назад

As humans our brains work against us in this area. This is one area where “we are too smart for our own good”. John C Bogle proved this 70 years ago and WallStreet laughed at him. The best managers over a 20 year period can only be identified in hindsight. And by that time they have had a 40+ year career and are thinking of retirement Peter Lynch Richard Akre Donald Yacktman to mention a few

@pauld9653 3 месяца назад

Thanks for the supporting argument data.. the only asterisk would be that guess what.. the SP500 is an Actively managed index.. as is the Dow.. people choose what stocks go into the index and change it all the time. You support the passive investor theme, even tho you yourself have individual stock in your portfolio.

@Dividendflywheel 3 месяца назад

I agree that the The Dow is actively selected index. But the S&P 500 components are based on market capitalization. Not sure how humans influence the selection criteria.

@Matt-wv7ht 3 месяца назад

Are you left handed, and if so, have you factored this into the longevity of you and your retirement?

@josh9231 3 месяца назад

Put simply the funds that underperformed in 2023 are not 100 percent the same funds that underperformed in 2022 and 2021 etc. it’s a multiplying diminishing effect

@mskuriscak 2 месяца назад

The best part of the whole thing is shedding light on the fact that Growth fund for the last 10-15 years has been an awful growth mutual fund. Advisors chuck their clients into it all the time because its the best performing equity fund american funds have but its gross.

@FlagstaffChief 3 месяца назад

Your comment about investing a million dollars versus investing billions was essentially, "invest in small companies to really move the needle," yet you (in other videos) shy away from suggesting the addition of a small cap value or blend fund to improve the long term returns of your one- to three-fund portfolios, which have very little exposure to small cap. 20:35 That's just an observation, not a criticism.

@grigorirasputin425 3 месяца назад

For every dollar you put in $5.75 goes to fees 😂😂😂😂😂

@gthree0239 3 месяца назад

I’m a recovering Dave Ramsey follower, I’m still boggled at why he’s so arrogant and adamant about calling people losers who invest in index funds. Thanks for helping me recover from following his investment advice.

@Fred2-123 3 месяца назад

@gthree0239 Ramsey is good for his getting out of debt advice. But poor on his investing advice.

@evanwheeler7687 3 месяца назад

Ramsey's got a huge ego and is a serious victim of confirmation bias. His value comes from telling people to get out of debt and invest, not the investment advice, itself. People "graduate" from Ramsey once they start digging into investing on their own after getting their finances in order. It's obvious that Ramsey has had a positive impact, but he's just the first step in a journey.

@Dividendflywheel 3 месяца назад

Think of financial literacy as a journey. Similar to formal education that starts in kindergarten. Dave Ramsey’s plan is called the Baby steps (the basics). Sadly the majority of our population remain at this stage. You my friend have graduated. Time to start doing calculus and geometry 😊😊😊. Nevertheless, Dave Ramsey’s curriculum and message is so popular that it built an $800 million empire teaching people basic personal finance. That is where our population is. If you want his more advanced stuff he has content for business owners. Best wishes

@et_phonehome_2822 3 месяца назад

Contra fund is the worse fund which I had for over 10 years, eventually dumped it maybe 5 years ago.

@Idahomie 3 месяца назад

A 1991 artcle by J. Bogel?..is that all you could find?

@rickyaz8640 2 месяца назад

Qqq smokes all of them. Even a 50/50 VTI + QQQ beats them all

@Thomasbonner752 2 месяца назад

I like to have SCHD. 20% of each ROTH IRA Portfolio. Yield: 3.75% 60% SPY. 20% Various Income Funds, PFF, ILTB, TLT.....What are more interesting buys for long term growth? I want to get in with about 300k in cash savings lying waste to inflation

@obrienortega6942 3 месяца назад

I think I'll stick with SCHB and SCHZ. DONE!

@roberthodge6711 3 месяца назад

Rob, aren’t you ignoring S&P Global bias in reporting such results? At least , you should beware of potential biased reporting.

@Toomanydays 3 месяца назад

But chasing rainbows is fun.

@nancys7326 3 месяца назад

I understand why you need to compare apples to apples but in reality the money I’d be investing in Fidelity contrafund (for example) would otherwise be in VTI, not a growth fund…