Why Buy ETFs if They Don't Beat the Market?
Seana Smith disects the debate over ETFs.
- Duration 5:38
- Date Mar 22, 2012
Seana Smith disects the debate over ETFs.
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-- -- -- things we talk about a lot on the show are how mutual funds cannot are actively treating mutual funds cannot beat the market.
So when -- paying for -- Smith is here right now to talk more about that.
It's a really hard sell.
And probably why a lot of people mom pops in whenever older people have their money on the sidelines because -- like you know why should I pay any a manager and mutual fund.
He's not gonna -- the market -- where she.
I can't give myself some -- -- matches.
Is that -- and that's or influencing some cash and plans right now people because all the volatility in the market over the past years years three years.
He bar I -- it's up then and now have I mean that to be has always been so heated between if he should go of the past about.
I keep it if they should pay the managers like angled accent -- And now it's heating up even want because of a recent study which came out last week from the house and he said that four out of five.
Mutual funds which are out actively managed the stock mutual funds.
Under performed there and ax son or are excited that over for a patent is back in the eighties -- 84%.
Of the funds so really many hot -- -- and that's I think not even Warner as.
They have accidents and that we don't even know how that index is gonna deal how the market's gonna do -- -- is so much.
Macro concerns right now we get that -- exact phrases that mean although they take it down the road itself and that is on everyone's finally kind of in the back -- now.
And -- to be as -- and kind of be coming up again and -- have election we have so much uncertainty in the markets.
Now let me see at this recent outpouring ads for at a key about managers at a performing or even Warner Music kind of jump in and buy in the market right now.
Really interesting -- -- because and -- which is.
This is probably.
Food before the ETF market right -- headed.
Maybe ETF market thousands of clinching indices you've talked about how the prices a bit and that these have come down so dramatically -- who's so why would and I just got in even if it's random right quickly some Brazilian ETF.
At least we know it's gonna follow an index and a and you don't have -- not on the whim of some manager yet clear reducing MS and that's why am I talked to -- on these governments on who is basically saying that.
You have all these conflicting imports get people out there advocating we're saying that if you find him right in the past -- you find the right minute I'm -- And you find it play out places right out hitting their assets and if you.
Have a great kind of advantage over the market that you should take the rest file anything in a bank says it doesn't make sense -- what you're saying is that.
It's actually the most important thing to do is kind of -- -- bounce so.
Historically I am -- been kind of arguing talent -- portfolio's 80% in the next 20% and active kind of bounce out the rest.
And he's -- -- at that doesn't make sense anymore although -- -- -- that you should even take.
Biased reporting saying that you should -- -- The risk in -- minute actively managed funds kind of -- at around forty to 50% and then the oppressed and that passive funds.
Which is what you can -- I attack and see what passive funds have been doing while you made that amount for 23 minus thirty years.
I was you can see what they've done historically any kind of build off and then that's -- nation.
Kind of out he's seen what -- you still want to sell looking your portfolio and then lastly ET impressed with active funds there's still room for both within the market.
Because there are some fund managers have blown out what are the island and you gotta do you gotta to -- had to some of them Meehan Bill Gross is -- ground we talked about here is that they're always -- angry -- -- credit angry at selling took a look at a few act differently to outside.
To look at we highlighted three different heads of index funds which we -- what's we thought that.
Then that's it could make it's it's -- play it's a safe play.
But still exposing -- also gives you room to kind of take it needs of active market has also freely highlighted for you whereas the vanguard total stock market index.
The Fidelity Spartan total market index advantage and then this -- total.
Stock market index now all these are at.
I'm all three are very cheap down rock bottom Ricci with -- 59 basis points so Barry very cheap.
I'm they've -- very strong performers and -- I.
They give their investors have very diverse exposure and so you're exposed Q -- different accents and that stock sector is.
Industries I mean a lot of -- the top holdings in your Staples like apple Microsoft who bought -- -- right at -- so.
Stocks that have that very -- plays dividend paying facts novels dividend paying facts out.
Kind of you know what you're gonna know what you're getting into and and that's when we have core C holdings like this and that's any -- here.
Kind of -- -- and do they ask congress you have headlines and then.
So you mention earlier 81 point 28%.
81 point 8% of the large cap stock funds last year have underperformed.
The market over 65% 67% to be exact in -- may have -- funds have underperformed the market.
And over 85% the worst performing sector last year was a small cap funds to the man hours of these mom and funds did the words they did the last laugh.
But then you also have a 15% -- that twenty but I can't I can't allow that and they at my house and they rocked the world you're right.
So it's always very apprentice and that cost -- -- where putting your money and just.
But you think that and it is -- Adds that the ten year on -- managers -- times that makes a difference yes John Smith that is great stuff you have an -- on foxbusiness.com.
On our website there isn't -- due mutual fund managers matter.
Yes they do and they -- it's very big time shock isn't as good stuff thank him much.