Word: indexes
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Dates: during 1990-1999
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...fund industry's not-so-funny little quirks is that most stock-fund managers can't beat important benchmarks like the Standard & Poor's 500, even though they try with all their might. That index represents the average stock. In theory, half of all funds should beat it while half fall short. In reality, in the past 10 years only 20% of diversified, actively managed U.S. stock funds have done better. Laggards include big names such as Income Fund of America, with assets of $16 billion, and Fidelity Puritan, with assets of $19 billion...
...costs eat you up," says John Bogle, a low-fee fanatic and chairman of mutual-fund company Vanguard Group, which champions "index funds" as the surest road to long-term investment success. Over long periods, Bogle says, it's inevitable that managed funds will trail the benchmarks by roughly 2 percentage points a year, reflecting their costs. But index funds such as Vanguard's Index 500, which mimics the S&P 500 by owning essentially the same stocks, have low fee structures and allow individuals to easily approximate the market's average return year after year. Last year the Index...
...last few years are clearly unique," says investing legend Peter Lynch, vice chairman of fund company Fidelity Management Research. "Huge companies have been beloved." In that environment, fund managers with even small doses of non-index stocks don't have much chance of beating the indexes. But, Lynch notes, active fund managers have sparkled at times, as in 1991-93, when the postrecession economy was lifting small stocks fastest. In 1991 the average fund rose 37%, vs. 30% for the S&P 500, and 60% of funds beat the benchmark...
Lynch believes index funds make sense for investors who would otherwise switch their money furiously, chasing the latest fund fad only to get there late each time. Indeed, Fidelity is doubling its index-fund offerings from three to six this year. But, Lynch says, it's wrong to assume large stocks will be in favor forever. "That's not the history of the stock market," he says. "And it won't be true the next 30 years either. Giant companies...
Gephardt has also warned the Administration against getting budget relief by revising down the Consumer Price Index, which is apparently giving retirees cost of living increases about 30% higher than the rate of inflation. Bringing the CPI even halfway into line with economic reality would shave billions off the deficit. But Clinton and Gore don't need the savings to balance the budget this year, so they'll consider a CPI adjustment down the road...