Category: Tag: Index Funds View all
Evidence-based fund managers have freed themselves from tracking popular indexes by establishing their own parameters for cost-effectively investing in most of the securities within the asset classes being targeted.
There are many other variations on these themes. The point is, indexes using different weightings can reach significantly different conclusions about the performance of the same market slice.
Think of index points as being like thermometer degrees. Most of us can’t explain exactly how a degree is calculated, but we know hot from cold. We also know that Fahrenheit and Celsius both tell us what the temperature is, in different ways.
Early on, indexes were designed to offer a rough idea of how a market segment and its underlying economy were faring.
The other day I posted an article about the difficulty active managers have in outperforming their target indices. One of the reasons we turn to evidence-based investing is to guide us past the misguided strategies that can otherwise cause an investor’ …