JoePamato2... you are helping me with me side of this debate without even realizing it. (I don't even know where to start in replying to your post, but here it goes...)
You say index funds ARE diversified? Perhaps in theory , but not in reality. Index funds are market cap weighted, which means the companies with the highest market cap makes up a higher % of the assets, thus has a bigger impact on gains/losses.
My perfect example (as I shown in a previous post) was that in year 2000, the S&P was down -9%...The techs in the S&P were down -40%...yet the non techs were UP, YES UP 5.9%.
So I am correct when I say index funds ACT like a technology fund and are NOT diversified. Only the BIG caps determine the gains or losses.
And in a raging bull market, this is magnified in more. Which brings me to Janus. Yes, in a raging bull market they did great and beat the index...but they took more risk and we saw the result when the market turned.
Also, I don't consider the definition of managed funds as contant buying & selling of stock. It has come to my attention that alot of people think that is all managed funds do. This is incorrect.
You say Vanguard doesn't advertise? This in very inaccurate. Look in any financial publication and you will see their ads. That is NOT how they keep expenses low. They keep them low because they sell index funds and their should be little cost in such a fund. And they do have managed funds, because their goal is to market themselves in order to make money, and they provide a market for those who want managed funds...even though they strongly promote indexing. (kind of a conflict, don't you think?).
When I say there are funds that consistently beat the index, I AM refering to long-term (as I stated before).
Joe, if a fund has a beta higher or lower than the index it means it has higher or lower volatility (or a measure of risk). Therefore, you make MY point...how do you expect a fund with , say, a beta of .75 to beat the index? That fund manager is not trying to accomplish this. Only the media would say all fund managers goal is to beat the index. (Again, inaccurate information.)
Lastly, like I said, if you like index funds, great (I am not trying to change YOUR mind). I am simply stating facts that others have not provided...mainly the media and index funds.
I have come to the concclusion that index funds are more hype than substance. They are overly promoted. And, those that promote them DO NOT make apples to apples comparisons...thats for sure!
Index funds are NOT diversified, act like tech funds, and there are plently of managed funds that out-perform the index...over long periods of time. Its not a secret...it the truth. You just have to see it! :)
[This message has been edited by Mark A (edited July 23, 2001).]