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Empowered Investor: A Guide to Building Better
Portfolios by Keith Matthews
Price $15.95>> 
 Myth#1:
Active Management Outperforms Index Management
Mutual Funds and Investment Counsellors Are No Longer “Sacred
Cows”
It took the recent great bear market of 2000-2002 for many investors
to begin questioning the merits of the stock picking mutual fund
or investment counsellor managers. We had been promised that asset
class indexing strategies would get clobbered by active stock picking
strategies in any market decline. We were told that the smart managers
would know how much cash to hold onto and which stocks to sell in
the bear market, thus protecting investors from the equity market
declines.
Unfortunately this was not the case. In fact, this recent bear
market has highlighted the fact that the average active manager
did not really perform any better than the broad benchmarks that
they are measured against.
Active Stock Picking Managers vs. Indexes
The data below show all relevant asset classes available to Canadian
investors through Canadian mutual fund offerings. This ten-year
chart marks an interesting time horizon, including the end of the
bull market and the entire bear market. It demonstrates that in
almost ALL asset classes, Canadian investors would have been better
off by investing in indexes rather than in actively managed funds.
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