Tags: OShaughnessy | index | investing | active

Money Manager O'Shaughnessy: Index Investing Doesn't Cut it Now

By    |   Tuesday, 23 September 2014 02:36 PM

Many investment luminaries, including Vanguard Group founder Jack Bogle, talk up index mutual funds/exchange-traded funds over actively managed stock funds.

That's for good reason: index funds have smaller fees and outperform most actively managed funds in the long term. But now isn't a good time for indexing, says Jim O'Shaughnessy, CEO of O'Shaughnessy Asset Management.

"The problem right now is a rush to indexing," he tells Yahoo. "If you're indexing to the S&P 500 you're buying the most expensive names in the market. "Our research shows that buying the most expensive [stocks] is a sure way to underperform."

Editor’s Note:
New Warning - Stocks on Verge of Major Collapse

The index is weighted by market capitalization, so the big companies whose stock prices have run up the most make up the biggest part of the index

Seeking out "well-valued, financially strong companies," is the way to go, O'Shaughnessy notes. "If on the other hand you're buying the story-stock du jour, which is generally one of the most richly valued, watch out below."

O'Shaughnessy's favorite companies include Travelers (TRV), Hewlett-Packard (HPQ), and Staples (SPLS).

Other experts say indexing is still the best way to go. Nobel laureate economist Eugene Fama is one of them.

"As far as individual investors are concerned, they're clearly so much better off buying passive products than they are buying active products. It's really laughable," he said at an investment conference last week, MarketWatch reports.

Fama noted that investment legend Warren Buffett supports the idea of indexing. "He's like my hero, because he says, 'I can pick a company every couple of years, but if you have to form a portfolio, you're better off going passive.'"

Editor’s Note: New Warning - Stocks on Verge of Major Collapse

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Many investment luminaries, including Vanguard Group founder Jack Bogle, talk up index mutual funds/exchange-traded funds over actively managed stock funds.
OShaughnessy, index, investing, active
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2014-36-23
Tuesday, 23 September 2014 02:36 PM
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