Does active management earn its fees in down markets?
In this episode we analyze the performance of the Growth Fund of America from American Funds vs. Vanguard S&P 500, Vanguard Total Stock and Small Cap Index.
In up years the SP 500 smoked the Growth Fund. But that’s okay right? After all it’s the down market that active funds outperform.
Nope. Not even close.
Similar down market declines. A whole lot less upside in rising markets for active funds.
Should Growth Fund of America be my proxy? Why not? it was HUGE not too long ago. If memory serves GFA was the largest fund in the world at one point a few years ago.
In the huge decline of 2007-2009, GFA was down 50% as was the index funds. But active management is supposed to keep that from happening.
Not this time.
So, if the Growth Fund of America can’t outperform with it’s low expense ratios and low turnover, what’s the likelihood other funds can???
Hard to see that happening.