Is Active Management Paying Off

Is your actively managed account or mutual fund performing better than the overall market? If not it makes sense to move that money to an index fund that mimics the overall market or seek another fund or account manager. Indexes can be purchased through many discount brokers although Vanguard was the first one to promote index funds. The management fees and commissions are less expensive with an index fund over an actively managed fund. Taxes will also tend to be lower since there is little buying and selling activity also known as turnover in the index funds. You can check Morningstar to compare your mutual fund’s performance against an index or if you have a privately managed account just call and ask the manager how the performance has been compared to the index. If you use a financial advisor this is also a good question for her. This is the first in a series about indexes and ETF’s. For now just remember that it is reasonable to expect better performance from an actively managed account vs. an index fund over and above the additional expenses for an actively managed account. Check to see whether this is happening with each of your investments.

Prosperous Investing!