Fun Facts Newsletter | April 2014

As I write this on April Fool’s Day, I promise no foolish information, only the “Fun Facts…” that you have come to know and love. May your heart grow even fonder! The active vs passive management has raged for years and one of the better on-going factual studies is the S&P Indices Versus Active Funds U.S. Scorecard (or SPIVA for us industry geeks) prepared by the Standard & Poor’s Corp, caretaker of the Standard & Poor’s 500 Index and other S&P indices.

The facts continue to support the benefits of passive or index management. For the five years ending December 31, 2013, the percentage of U.S. Stock Funds outperformed by their respective S&P Index was as follows:

73% S&P 500 (U.S. Large Company Stocks)
78% S&P MidCap 400
67% S&P SmallCap 600
   

This means that only 27% of U.S. large company stock funds beat the S&P 500 index over the five years ending 12/31/13.  Given that the past performance of a specific fund is only about 50% accurate in predicting its future performance, the ability to pick superior performing funds in advance is very poor and adds to the benefits and “financial peace of mind” of owning a passively managed fund.

International results were strongly in favor of passive management. For the five years ending December 31, 2013, the percentage of International Stock Funds outperformed by their respective S&P Index was as follows:

71% International Stock Funds
80% International Emerging Markets Stock Funds
   

A quick word about income tax filing season, specifically if you plan to make federal estimated income tax payments in 2014. Automating your income tax estimated payments can increase your financial peace of mind. You can automate estimated tax payments by using your bank bill pay service and scheduling the check payments in advance, or using the Electronic Fund Transfer Payment System provided by the U.S. Treasury Dept. Learn more at www.eftps.gov. Contact us if we can be of assistance or to discuss other ideas.

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