Index Funds

Can Portfolio Managers Beat the Market?

A Lower Cost Alternative

S&P/TSX 60 S&P 500 MSCI EAFE Dow 30 S&P MidCap 400

Indexing is a passive investment strategy designed to track or mirror market performance as closely as possible. Stocks are purchased in amounts that match the underlying index's composition or derivative instruments are used to replicate the benchmark index's performance. As such, the return on most index funds will approximately equal that of the underlying index, less the management expense ratio.

Altamira offers the following index funds:

A combination of index and actively managed funds can certainly provide investors with the best of both worlds. Contact an Investment Specialist today at 1 888 ALTAMIRA (1 888 258-2647) to learn more about our index funds and how they might fit into your portfolio.

Can Portfolio Managers Beat the Market?

The debate continues on this point, although it is unlikely to be resolved any time soon. Nevertheless, certain sectors and geographic regions seem to lend themselves better to an actively managed approach, with technology and emerging markets as key examples. However, index funds do offer some other benefits, such as the ability to enhance foreign exposure in registered accounts and lower portfolio turnover rates that result in reduced tax liabilities.

There are some drawbacks associated with index funds, namely the inability to reduce or eliminate underperforming stocks. As long as a stock remains part of the underlying index, it must be held in the index fund portfolio. There is no protection from market volatility in an index fund - it simply rises and falls in tandem with the benchmark index.

Ultimately, the allocation made to index funds in one's portfolio will hinge upon your individual circumstances and investment goals.

A Lower Cost Alternative To top

With index funds there is no portfolio manager to actively run the fund, no research costs to be borne by investors, and often lower transaction costs. As a result, the management expense ratios charged on index funds are ordinarily lower than those for comparable actively managed funds.

Other cost savings stem from the more tax efficient nature of index funds, which typically have lower portfolio turnover rates. A buy and hold approach is synonymous with passive investment strategies and fewer capital gains triggering transactions increase the potential to earn higher after-tax returns.