Pick Good Funds
The Wall Street Journal and the financial community have been abuzz about passive investing. I wrote about settling for average and outrunning a bear via active management previously. The newest argument for choosing active management over passive is that investors should choose ‘good’ managers, not average or bad managers. Why didn’t anyone think of that before? Choosing a good manager sounds like common sense, but really this is an attempted rebuttal of the fact that benchmarks outperform 70-80% of actively managed funds. Capital Group (parent company of American Funds) even published a scorecard in a sort of homage to S&P’s SPIVA report that touts the performance of ‘good’ funds. Tim Armour, chairman of Capital Group, asks why an investor would buy Blockbuster stock in the early 2000s when they could have bought Netflix – the assumption being that a good manager would have bought Netflix while an index would have been forced…