Fire your fund manager: stock indices trounce portfolio pros

Today’s Yahoo Finance article provides another reminder of the merits of index investing.  I extract a subtle point from the article: large cap indexes are very tough to beat while smaller capitalization indexes are less very tough to beat.  🙂

By the numbers, 70% or more of active fund managers underperform their benchmark.  But what about the 30% that do?  I am unaware of any consistent approach to identify those 30% in advance.  Also, the “group of 30%” changes from year to year.

I recommend the good ‘ol “Core and Explore” approach.  Have at least 75% of your portfolio by the book with index funds.  If you like to gamble, go ahead, but with no more than 25% of the pie.

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