SCHD is a Dow Jones U.S. Dividend 100 Index tracker, that example just compares performance of 2 indices. Beating the market would refer to a fund (closed/open doesn’t really matter) that beat its corresponding benchmark.
You can create a rules based index out of anything. Defining a strategy and making an index out of it doesn't invalidate the strategy.
When people say "the market", they are referring to the S&P 500. If a rules based strategy beats the S&P500, then it is outperforming the market. If it's offered as a mutual fund, then that fund is beating the market too
Let's say I manage an ETF offering exposure to Fictionaland, a booming economy that's difficult for investors to access otherwise. My fund returns 15% over a given period and the S&P500 only returns 10%. Am I beating the market? Am I a good ETF manager?
Would it change your mind if I told you the Fictional 500, the index my ETF tracks, had returned 30% over that same period? Would you maybe have some questions about how I managed my ETF?
adam_arthur|3 years ago
When people say "the market", they are referring to the S&P 500. If a rules based strategy beats the S&P500, then it is outperforming the market. If it's offered as a mutual fund, then that fund is beating the market too
maxbond|3 years ago
Would it change your mind if I told you the Fictional 500, the index my ETF tracks, had returned 30% over that same period? Would you maybe have some questions about how I managed my ETF?