Question

Vanguard literature states"The investmentsor benchmarks you choose fall into diffrent investment catagories. This comparison may not provide complete or accurate results".
Is the passively msnaged Vanguard Fund(VTI) an appropriate comparator or benchmark against which ti evaluate the performance of Fidelity's actively managed fund- FMAGX?

Answer 1

Passively managed Mutual Funds are always reflective of index because the shares are always proportionated similar to that of an index and the rate of return of the mutual funds which are passive in nature will always match the rate of return of those index, because this is complete replication of entire index.

The passively managed Mutual Funds should not be compared with the actively managed mutual fund because both have different principles of management as actively managed Mutual Funds are always looking for being readjusted with the market scenario where as the passively adjusted mutual fund do not look for readjustment and they are highly uniform in nature and they follow the index. So, According to me, Both the mutual funds should not be compared because they are differently managed, and they have different criteria of providing returns because at the times of extreme outperformance on the upside, active funds will outperform the passive funds, and when it comes to outperformance on the downside, the passively managed fund will provide better returns.