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Are Actively Managed Mutual Funds Fading Away?

TedTed
in Fund Discussions
FYI: Passive index fund investing is popular for a singular reason. In most cases, passive index fund investment returns surpass those of active fund managers.

John Bogle and his Vanguard brokerage firm launched the first S&P 500 index fund in 1977 with the idea that if costs were slashed, a simple fund that mirrored the S&P 500 had a chance to return close to 9 percent annually, the historical stock market average.

Gradually, the index fund caught on and today there are hundreds of varieties of index funds covering popular indices such as the Dow Jones industrial average and the S&P 500, to niche funds encompassing small-cap, growth, value stocks and more. Investors can also choose from bond, commodity and alternative asset index funds.

The index fund mania doesn't show signs of abating. A recent research report from Standard & Poor's found that index fund investing was more successful than ever. The 2017 report states that over the last 15 years, 92 percent of actively managed large-cap funds returns lagged those of a S&P 500 index fund. And, small- and mid-cap active funds were worse performers with 93 and 95 percent of indexes, respectively, winning the return competition over similar actively managed funds.
Regards,
Ted
https://money.usnews.com/investing/funds/articles/2018-09-05/are-actively-managed-mutual-funds-fading-away

Comments

  • MOZART325
    The title of this article should be changed to "Are High Fee Mutual Funds Fading Away?". It is not so much active or passive that determines better returns. Lower fees are a big advantage regardless of whether the strategy used is active or passive. An active fund with an expense ratio of 30 basis points should do better over the long term than an index fund charging 100 basis points.

    The active fund companies try to keep the active/passive debate going but it is really a distraction. They should just lower their fees to help shareholders get better returns.
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