Be Wealthy & Smart 111: 3 Ways to Evaluate ETF's vs. Mutual Funds
Mar 15, 2016
Discover the key differences between ETFs and managed mutual funds, focusing on performance, fees, and investment strategies. Learn why the 80/20 rule matters in your investment decisions. Understand the importance of prioritizing investment outcomes over costs to maximize your returns.
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Understanding ETFs and Index Funds
- ETFs and index funds are baskets of stocks that track market averages without active management.
- They offer convenient, low-cost exposure but no potential for outperformance from active stock picking.
Managed Funds Often Underperform
- Most actively managed funds fail to outperform their benchmark indexes over time.
- Higher fees in managed funds create a performance hurdle that many fail to clear.
The 80-20 Rule in Fund Managers
- About 20% of active fund managers consistently outperform indexes despite most underperforming.
- Long-term outperformance is rare and requires diligent research to identify these managers.