The John Bogle advice index fund fans don't tell you about

Let's see what the father of passive investing had to say about actively-managed funds

The John Bogle advice index fund fans don't tell you about

dhanak हिंदी में भी पढ़ें read-in-hindi

John Bogle, the late founder of Vanguard and a pioneer in the investing world, is well-known for his advocacy of index funds and passive investing. His writings are often quoted by advocates of index funds in India, and even fund houses that launch index funds rely on his famous quotes as a powerful marketing tool.

However, despite his reputation as an advocate for index funds, a closer look reveals that Bogle did not completely dismiss the value of active funds. In fact, he believed that actively-managed funds may perform better in emerging markets, where there is less liquidity, making it difficult for index funds to achieve benchmark returns. Actively-managed funds can take advantage of market inefficiencies, mispricings, and unique opportunities that may not be captured by index funds.

India, as an emerging market, offers a good opportunity for active fund management - a point that investors should take note of. Bogle believed that active funds could be a worthwhile investment under certain circumstances. Unfortunately, this significant point is often overlooked due to the marketing hype that constantly surrounds the investing world.

As per Bogle, if you're considering to invest, look for an active fund that has the following:

Low expenses: Actively-managed funds should have lower expenses since fees erode investment returns over time. Investors should look for funds with lower expense ratios and avoid hidden costs.

Experienced and aligned management: Fund managers should have a proven track record of success and their investment strategy should align with the investor's goals and risk tolerance. They should also have a disciplined process for selecting and managing investments.

Consistent long-term performance: The fund should have consistently outperformed its benchmark index over at least ten years, indicating the fund manager's ability to navigate different market conditions.

While Bogle's advice predates the popularity of index funds, these criteria are still relevant for evaluating actively-managed funds.

Other Categories