Download Active Index Investing: Maximizing Portfolio Performance and by Steven A. Schoenfeld PDF

By Steven A. Schoenfeld

For over 3 many years, indexing has develop into more and more authorised by way of either institutional and person investors.  Index benchmarks and funding items that music them were a motive force within the transformation of funding method from artwork to technological know-how. but traders’ knowing of the sophistication of this burgeoning box has lagged the transforming into use of index products.

Active Index Investing is the definitive advisor to how indexes are built, how index-based portfolios are controlled, and the way the world’s so much refined traders use index-based techniques to augment functionality, decrease bills and reduce the hazards of investing.

Active Index Investing presents a complete evaluate of (1) the funding theories which are the basis of index dependent making an investment, (2) top practices in benchmark building, (3) the becoming international of index-based funding cars, (4) state-of-the-art index portfolio administration techniq ues and (5) the myriad methods traders can and do catch some great benefits of indexing.

Active Index Investing has a special layout that captures the perspectives and views of over forty of the funding industry’s prime specialists and practitioners, whereas preserving a holistic view of this advanced material. as well as the Appendix and thesaurus in the booklet, it positive factors an E-ppendix, on hand at www.IndexUniverse.com

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To which Nobel Laureate Paul Samuelson replied, “People say that you’re settling for mediocrity [with indexing]. ” This book will not engage in that debate. As Chapter 3 indicates, for sophisticated investors, this debate is over, and the conclusion is both simple and elegant. What maximizes the efficiency of an overall portfolio is not “index versus active,” but instead, a combination of both approaches. This book shows the reader how smart cost- and risk-sensitive investors use the power of indexing to maximize portfolio performance and minimize risk.

Qxd 6/14/04 8:45 AM Page 13 CHAPTER 2 The Foundations of Indexing Theoretical and Practical Underpinnings of a Heretical Concept Binu George, Steven A. Schoenfeld, and Jim Wiandt Editor’s Note This chapter chronicles the evolution of the investment theories that explain why index investing is the most rational method of fund management. Harry Markowitz’s theory of efficient portfolios and subsequent research by William Sharpe, Paul Samuelson, and others laid the philosophical foundations of index investing.

It’s pretty easy. The data says that indexing wins . . but it wins by much more than the data shows. Because the data has survivor bias, incubation bias, and cash flow bias (many investors buy high and sell low). Investors’ dollar-weighted returns are a fraction of the funds’ advertised time-weighted return. Indexing wins by so much that it’s staggering. Wiandt: To you, what is the definition of good index fund management? Bogle: No index fund management. Don’t do something. Just stand there. That’s essentially what you can do in a total stock market index.

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