Study Reveals Indexing Wins Again

For those that have taken to indexing over the last several years, we have John Bogle, pioneer of indexing and founder of The Vanguard Group and Vanguard index funds, to thank. A recent study by Standard & Poor’s revealed that “actively managed mutual funds beat their benchmark index in 2009. No surprise here: Just 39.2 per cent of Canadian equity funds beat the S&P/TSX composite index, an underperformance that fits in with other scorecards released by S&P.”

I guess you don’t have to be a US citizen to get underperformance in your mutual funds. According to a recent article in Canada’s The Globe and Mail, “Longer-term, though, the results are more discouraging for mutual fund investors. Over three years, only 12.5 per cent of actively managed funds beat the index, and the average annualized return drops to a loss of 2.4 per cent. And over five years, just 7.45 per cent of funds beat the index, with an annualized gain of 4.5 per cent, versus a 7.7 per cent gain for the index.” As short sighted as we may all become, we can not lose site of a longer timeframe, and the financial benefits of investing in index funds — that is if we want to be financially comfortable when it comes time to retire.