I found lot of things not to like about that article.
Lance Roberts wrote:First, there is NO fund manager alive that can beat an index fund every year, year-after-year, over a long time period even if they simply mimicking the index. This is clearly shown by comparing the Vanguard S&P 500 Index fund as compared to the S&P 500 Index.
This is ludicrous on two levels. First, how could the failure of an index fund to match the index ever "prove" that no active manager can beat the index year after year? In fact there is nothing that can ever prove such a statement about the future, as unlikely as it is to occur (and as unimportant as it may be that it should occur). Second, I take the point of that paragraph to be to seed the idea that "if index funds are so great as vaunted, they should be able to beat the index", which is absurd, they're not designed to do this.
He then dismisses the SPIVA report as data mining, ignoring the long history of similarly inevitable SPIVA reports.
His rhetoric seems to be:
1) The index is a mythical creature, you can't beat it with index funds [absurd], or even get the exact same results [fair enough];
2) Therefore it's bad to "chase" the index, so stop doing it;
3) By default, the only alternative left is active management;
4) So put your money into:
Let's create a fund that underperforms the index by 20% when markets are rising and loses 20% of every market decline. Also, let's include a 2% annual expense to cover fees and other trading related costs which are not included in the index.
Oh wait, I'm lost, isn't that a mythical creature too?
But, no worries I can just put my money into the Dodge & Cox Balanced Fund instead of the S&P 500. Err, is that data mining, or did he give me this advice 20 years ago? (A point made by twa2w.) And, the faulty implication is that index proponents advocate putting all of one's money into stocks, rather than a balanced portfolio composed of stock, bond, etc., index funds.
Overall, ISTM this isn't really an article that actually tries to make a reasoned case
for active management. Instead, it's demonize and conquer
against the index. Maybe Lance should try politics, but probably it doesn't pay enough.