The fund industry daily Ignites informs me via my morning e-mail: "Advisors Not Buying ETF Hype, Sticking with Active Funds." That's curious in that every month, ETFs attract more assets, Morningstar's ETF coverage gains more readers, and I hear from I don't know how many advisors who have questions about ETFs, because they're incorporating them into their practices.

So I read the article. "In a survey of more than 400 advisors, Cerulli found that nearly 45% said they prefer using actively managed funds in their clients' portfolios rather than primarily passive ETF products."

Silly me, I had thought the elections were over.   More 

As a passive investor, my use of ETFs has been confined to holding a large, highly liquid major ETF index while waiting for the wash rules to lapse. For example, if Vanguard Total Stock Market VTSMX was sold for tax-harvesting reasons, shares of Vanguard Total Stock Market ETF VTI could be purchased in portfolios to maintain proper exposure. After the wash rules expire, the mutual fund could be repurchased. Other than this option, passive low-cost index mutual funds are the preferred investment vehicle for client portfolios. Why?   More 

In college, everybody knew that Stevie was the smartest guy around. He wowed them in the honors Shakespeare seminar, beat the math majors at their own game (eventually picking up a math degree of his own, just for the fun of it), and was outright brilliant in his chosen field, economics. By the time he was a senior, he had outstripped the undergraduate curriculum and was taking graduate courses under the tutelage of the previous year's Nobel Laureate.

And then, he quit. Abandoned all plans of becoming an economist, deciding instead between law school (Harvard, naturally) or an advanced degree in computer science (MIT, naturally). I asked him, why? He had been so excited about economics, since the first day as a callow, pimpled freshman.   More 

In recent months, I've received several e-mails that read like this:

Dear Morningstar,

I called Prominent Fund Company because your data did not match what it is publishing about its really big fund. The Person on the Telephone for Prominent Fund Company told me that 'Morningstar always gets our funds wrong.' Why does Morningstar continue to make these type of mistakes?

Signed - A concerned Morningstar subscriber

The reality, of course, is that the 2,400 people at Morningstar haven't gone AWOL, permitting basic data about a really big and really important fund to be incorrect month after month after month. The issue lies instead with the very reason that Morningstar exists: Different fund companies use the same words in different ways.   More 

I recently met with the representatives of a new fund of funds. The company's funds are only one month old, but the SEC permits them to quote a three-year track record. They would like Morningstar to do so, too.

I said, quite wittily, "Huh?"

It works like this. None of the underlying funds held by the fund of funds have a three-year track record--but the SEC permits the new funds to use the record of the existing funds from which they were cloned. OK, we've seen that before. But how to create the performance for the wrapper, for the fund of funds itself? Easy. The fund of funds is based on an index, so just say that the fund of funds would have held the underlying funds in the same proportion as specified for the index.   More