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A comment made recently by Gary Stone got me thinking.
Gary mentioned that most fund managers reference one of the common market indices as their benchmark but not many reference an accumulation index (i.e. one that includes dividends) and very few funds outperform accumulation indices, at least not over time.
Is this the case in your experience?
If so, would it be prudent to say buy and EFT which tracks an accumulation index (eg RVL) on the probability that one will be achieve a higher return than most fund managers over time?
A: I don’t recall Gary’s comment, however if he did say that, I don’t agree.
In my experience, the vast majority of fund-managers (in Australia) use an accumulation index as their benchmark.
An accumulation index includes the impact of dividends – a critical component of share market returns, particularly in Australia.
And yes, if I was investing in an EFT investing in Australia, I would only consider one that use an accumulation index for its benchmark.
