“So who still believes markets don’t work?
Apparently it is only the North Koreans, the Cubans and the active managers.”

— Rex Sinquefield, co-founder and board member Dimensional Fund Advisors

Obviously what Rex means is that if you believe in equity markets you just need to be in the Index and fund managers do not justify the costs that they charge. This is of course debatable and there is a big army out there in the world who hope to out perform the market index by a mile over a long period of time. However a lot of research shows that it requires nothing short of a magic wand to be able to CONSISTENTLY beat the index.

American research is clear on the fact that fund managers with all their allocation tools, research tools, etc take a toll on your return in terms of charges and the fund out performance vis -a-vis the index is almost non-existent.

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  1. Pingback: Do fund managers add value at all? · Mutual-Funds.ExplainedOnline.Net
  2. For index fund to succeed in india, the index should be constructed properly like in US with minimum churn in index stocks. Also when market matures, it is wise to be in index….But indian markets are still long way to go in that front.

    Regards
    Jagadees

  3. Also, the difference of charges (FMC) of an index fund and actively managed fund should be wide enough as to justify the “lower” returns. Plus, the abolishing of entry load has almost made sure that good actively managed funds are much better than the index funds.

    Ramesh

  4. if the world was an efficient market,what about entrepreneurs?
    the role of entrepreneurship is completely ignored by mainstream economists. entrepreneurs rearrange resources and organize them till they produce more value than they cost when unorganized .they are not mere arbitrageurs

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