John: Mr. Pape’s argument is non-sense. It goes something like this — 100% of ETFs lag their index but some active funds beat the index. Voila! Active funds are better. That’s true if you were fortunate enough to own fund A that beat the index this year, fund B that beat the index the year before, fund C that did well the year before that. Trouble is, there is nobody who is able to pick these market beating funds before they beat the index.

It’s true that “active fund managers CAN move into defensive stocks and/or build cash reserves”. Unfortunately, there is no evidence that they have been able to consistently do so.

Xenko: Thanks, I’ll fix it.

https://www.tdcanada.wallst.com/tdw/canada/markets/news/markets.exculsiveInsight.story.asp?docKey=867-GIGOLD20080917pape17-1

Gordon Pape claims “there is no evidence” that “only a minority of actively-managed mutual funds beat their benchmark indexes”. He doesn’t use any figures for this statement claiming that by definition 100% of index funds lag their benchmark after fees. I suppose that index funds do have a small lag, I wonder if anyone has quantified how much mutual funds lag their respective index’s by?