CC I would care if my fund did not beat the index, and I was paying a high MER.
You get what you pay for "should" apply, but sadly it often doesn't.
I think if you focus on the actual guy running the fund rather than the fund itself you can better your odds.
Buffet isn't the only one out there.
Tweedy Browne comes to mind, as does Charles(?) Brandes. He ran one of the popular canadian mutual funds at one point that was doing extremely well. Cant remember which one. Then he left and the fund didnt do as well. Charles's own funds did well.
If you own Berkshire you effectively own a mutual fund run by an excellent investor.
I am exploring a Smith manoeuvre and I am contemplating many types of investments, and was amazed at how you can make anything look good or bad by focusing on different statistics, research papers, and market time periods, etc. I thought I would play a little with statistics, and index funds having a zero % track record.
I am noticing a few "rules" of thumb though:
1. Passive indexing will outperform "most" active funds more of the time, and they are most suitable for the average joe who will not do research, or will be "spooked", and/or jump ship and chase the latest trends.
2. If you decide to DIY, or utilize an active manager, a value based approach, or a fund with a value based approach will more than likely outperform everything else most of the time over the long run.
Personally I believe you cant lose by going passive because at the end of the day markets have always gone up long term. (cant remember what book it was from but it showed a chart that went up and the caption was " through a great depression, 2 world wars, famine, disease, 1929 market crash, etc, markets always go up.)
Buffet himself advocates indexing so, really who can argue that?
I also believe that markets are not efficient, at least not in a sense that EMT would have you believe.
Mechanically yes markets are very efficient. The computer age, twitter, etc means there is no stone unturned. Information flows so quickly you cant say markets are not efficient.
Markets are not however rational. When Graham said markets were not efficient there were no computers. It took ice ages by todays standards for information to flow.
Replace efficient with rational and there you have it.
At the end of the day with all the technology we have, we are still human beings, fuelled by FEAR and GREED.
Graham was right about mr market the schizo.
Be fearful when others are greedy and greedy when others are fearful.
Very easy to say, VERY difficult to do.
Bottom line if you can say it, but not do it, go passive.
If you can say it AND do it, go active.