is it worth the extra fees to invest in actively managed mutual funds?

Answer 1

vanguard and fidelity both have no load funds, no
commission, only a tiny bit taken out of the fund for
expenses.
studies i have seen by and large show the extra fees are
not worth it.

Answer 2

Your assumption that the return is lower is false imo. It is more true it you average the funds' returns over a long term. Index funds average the whole market. But there is much sector rotation and different types of funds do better at different times. Small caps do well with low interest rates and an improving economy. They return higher than indexes at much higher at those times. Value funds have done poorly for many years because there were not a lot of cheap funds for this decade or longer. But now? There is huge value due to the market fall. It might be a great time to look at value. Same is true with Big Caps and Blue Chips having been a bit overvalued even after the internet bubble burst. The Dow index fell less than the rest of the market and those were a little overpriced imo. Not now. Sector stocks? Commodities and oil did far better than the market most of this decade but also may have taken the bigger hit in the last year. With index funds you get the dogs along with the good stocks. In an active managed fund you get a better selection because they are selected. I have one that regularly has outperformed the market. You can well if you have a good sense when to buy low in to a sector and rotate out when the prices rise. But that is a type of market timing by sector. It is easier to do since the parameters are longer term. I have plenty of reasons for investing in different ways with active management rather than just take the "average".

Answer 3

by definition, ALL mutual funds are "actively managed". You should look at total performance of the funds you are considering, be they load or no load funds (fees). Their results are after all fees and expenses. You can research this information on Yahoo finance. Just because you pay big fees does not necessarily mean that you are getting a better investment. Quite often, the large front in fees go to the broker who sell you the fund. So, be a smart investor and do your homework. The information is out there and it is free.

Answer 4

VERY simply speaking ....

Look at the the NET return on 1 year - 3 year - 5 year period. Make your decision on what fund has the best actual net return within the investment category you are interested in investing within.

If you buy a fund with a 0.25% net fee and annual returns of 8% .... you will make less than you would with a fund with a 1.25% net fee but annual returns of 10%.

Again, that was VERY simply stated but accurate.

Answer 5

There is no real answer for this, as it simply depends on a case by case basis.
I use to be a FA, and, depending on the clients risk tolerance, actively managed funds were the principal source of growth in their fund. (okay, bear in mind ALL funds are actively managed, but I know what you are directly referring to. I am issuing this parenthetical statement as a pre-emptive strike to the others who opt to question my competence.)
What I look for on these types of funds is the Investment Strategy of the Fund Manager, which that should be mentioned. The idea is that they are going to be looking into purchasing companies that they perceive to be cheap and maintain them until they before too expensive. They like to make this sound real complex and difficult but its really not. They will just be monitoring the P/E ratio relative to the stock's peers; in relation to said stock's projected growth performance. Everyone does this with the PEG ratio. So what you WANT to look for is any specific mention on the market. Generally they don't forecast anything to the public, but they do it for sure on their own. You can tell what they see as a future market condition by looking at the TOP THREE sectors they are invested in. The Financial Sector is more than likely going to be in there. Don't freak out about that. The Financial Sector alone comprises 20% of the US market, so there is no way they can't have it in there. But they should not have it as the number one or two position, wait a couple years on a fund that does this. If this fund has a Top Three area of investment in Information Technology, Health Care, Energy and/or Natural Resources...then this is a good growth fund. These areas a poised to do well in the years to come. Also, you want to see who are the top holdings, as they generally give you the top ten companies the fund is currently holding....make sure there aren't too many financials in this mix. I would be leary if there were more than 2-3. A fund could have Financials occupying the top third position in the fund, but have a majority of the top holdings be all held in financial stocks. These 10 stocks have a significant impact on the fund's performance...so, when the financials fall (which hasn't happened yet) you don't want a fund heavily weighted in a companies in that sector.

I know this is a lot to digest, and I apologize if I am not making sense. This question requires a lot of the big picture kind of answers. As for the fees themselves. Since I am assuming it is a growth fund (which all growth funds are) than you will be looking at paying capital gains taxes on the fund. Now, this depends on a lot...mainly on what stocks were sold and bought, and how long you had access to them. The Fund Manager cannot engage in day trading the Fund, its illegal. So the stocks that are bought and sold are generally held for more than a couple years (unless there is an emergency warranting the removal of a company...like if an Enron was in the portfolio). This means that, depending on how long you were in the fund, that you would only be paying 15% of the gains. This is not a huge number to worry about.
Funds that are not actively traded, like Value Funds, generall have companies that are not focused on growth, instead they are focused on income...meaning they pay dividends to investors. So, even though this fund is not actively traded, as you put it and as some class of funds ARE called, you still could end up paying money at years end...in fact, you will most certainly have to, its just relatively as to how much you would compared to the active fund. Dividends you received automatically get recycled back into your portfolio BUT you are still required to pay taxes on that amount....AND the taxes are based on your INCOME...so this information will be reported as income to the IRS, and can very well adjust your income tax bracket. This is very important, because SO MANY people are ignorant to this.
A Client had an FA that put their money into Value funds only. She didn't fully explain this to the client, and the client had a decent account. Year end they had received a FAT tax bill because of the dividends. They offset their tax bracket, putting them into another completely differennt bracket (15% to 20%). Problem is this Client's work has them in the 15% bracket, and because the FA didn't do her homework properly, this Client had to owe not only the taxes on the Dividends he received but the back taxes he didn't pay from his paycheck to the STATE and the FEDERAL government.
So don't let some idiot tell you that dividends are the way to go and it doesn't matter about monitoring your stuff...they are completely ignorant of the facts.

I hope this helped.
Good luck on your selection.
Incidentally, this selection you are referring to...is this for a 401k or an IRA?
If you have any specific questions about what I posted, you can post the question to me on my 360.

Answer 6

The answer is "sometimes." You need to look at the fund's management and long-term record vs. its peer funds to make a fair judgement.

Answer 7

I think it is if you can find a manager that you like. I have done well with Matthews Funds in the past. MCHFX is their China Fund.

http://top10traders.com/ViewHolding.aspx?symbol=MCHFX

Answer 8

yeah if you're a noob