Bill Miller is touted as the only active mutual fund manager to outperform the S&P 500 for 15 consecutive years. Check out the article at this location. It is a remarkable record for an active manager. But what about that old pesky index fund, VFINX. Check the comparison here on Yahoo. Look closely at that percentage difference over on the right. It appears as if VFINX comes in around 325% and LMVTX show up around 225%. It looks like the index wins again.
Welcome to the first full day of summer!
Lowell Herr
Photograph: Coffee cup from an outstanding software/hardware company in Oregon.
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Outperforming a benchmark such as the S&P 500 is the goal of many, if not most, investors. Is it possible to accomplish this feat over the long run? We believe it is possible to beat the market by careful asset allocation planning. Look for suggestions on the Premium Content side of the blog.
Lowell Herr
Photograph: Common site in Istanbul, Turkey
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I’ve never been completely satisfied using either the VFINX or the VTSMX as portfolio benchmarks. The VFINX is much too narrow as it only covers 500 large-cap stocks, whereas portfolios such as the AA-Mosaic, Passive Portfolio, C&D Portfolio, and the Mosaic2 are all investing in asset classes ranging far from a large-cap blend index. Even the VTSMX is inadequate as it does not adequately measure investments in international equities, emerging markets, REITs, commodities, and bonds.
Ideally, one would prefer a benchmark that measures the performance of all asset classes in a portfolio in proportion to the target percentages in each asset class. Since any portfolio will move away from the targets due to ETF price changes, one would be able to accurately measure how well the portfolio is performing relative to an appropriate benchmark. If any Tactical Asset Allocation (TAA) is applied to the portfolio, one would be able to measure if this adds or subtracts value from the portfolio.
Readers who have ideas as to how to improve the benchmark are welcome to post comments below.
Lowell Herr
Photograph: Inlet from the Assawoman Bay - near Ocean City, Maryland
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