In the modern era, Fidelity Magellan (FMAGX) may have received more accolades than any other large-cap mutual fund. Granted, Peter Lynch is not the manager anymore. Yet Magellan still holds a fond spot in the hearts and minds of the investing public.
It follows that we should expect to see some added value by the active management philosophy at Fidelity. If Magellan is the flagship, certainly it should compete with the S&P 500… should it not?
(Compete may not even be the right word… how about, "beat" the S&P 500. Why else would one invest in an actively managed mutual fund if it cannot outperform the popular index?)
The one-year chart shows that it’s not even close. Year-over-year, the S&P 500 Spider (SPY) has doubled Magellan’s take. And that translates into some serious dollars. (It baffles my mind when traditional mutual fund advocates bash exchange-traded funds… the proof is in every pudding pop!)
Okay, then. Let’s forget about Magellan. Let’s check on one of the 21st century’s most respected minds, Bill Nygren. Not only has Bill been seen on more covers of more magazines than nearly any of his peers in the last decade, but Oakmark Select (OAKLX) has $6 billion dollars of investor money. How has Bill performed?
Well, the last 6 months show that Bill and Oakmark Select (OAKLX) are hanging in there. But it appears to be a more volatile ride and a bigger struggle… just to keep pace with the index. Why not simply stick with the SPDR S&P 500 (SPY)?
(For those who feel that 6 months is not a valid time frame for investigation, perhaps it is worth noting that Oakmark Select OAKLX has underperformed the S&P 500 for 1, 3 and 5 years.)
In truth, it appears somewhat straightforward to me. ETFs, the index funds that trade like stocks, are superior investment vehicles. Exceptions surely exist, but I am more interested in the rule.