Comparing indices and funds is relatively basic (compared to complex investment or tax strategies) and relatively boring to write about, but this site’s goal is to help investors.
Differential analysis is something that many people ask about and research. Investors often want to know whether to use Fund A or Fund B. Sometimes the answer is easy and sometimes the answer doesn’t matter.
I remember trying to find the “best” funds as an amateur investor back in high school and college by scouring magazines and Morningstar.com. I’d focus on the 3-, 5-, and 10-year returns, not understanding that the timeframes we’re highly correlated with one another. I’d spend tons of time looking at expense ratios or betas, not understanding the much larger differences between funds. In short, I wasted a lot of time focusing on things that were irrelevant. I see many investors making the same mistakes today.
Unfortunately, there are not a lot of helpful sites out there. There is a lot of data available, but not much of it is necessarily helpful to individual investors.
- Understanding the difference in two expense ratios is not as important as understanding whether two funds are even comparable in the first place.
- Focusing on performance differences is not as important as understanding how the performance is presented and/or what drove that performance.
- Trying to differentiate between two nearly identical funds is usually not a great use of an investor’s time. Sometimes it is though.
- A post that’s got affiliate links all over it and takes paragraph-long tangents into this brokerage or that investing service is annoying at best and dangerous at worst.
The purpose of these comparison articles is to help investors focus on the things that matter. My overall goal is to help investors and these articles are an easy way for me to scalably address widespread (but easy) questions.