Actively Managed Funds vs. Passive Index Funds Debate
This week on WEALTHTRACK.com we are offering a special extended interview with Christine Benz and Russel Kinnel, both from Morningstar.
We asked these two members of the WEALTHTRACK Brain Trust to discuss the positive and the negative changes they have seen in the mutual fund industry in the past 20 years.
Actively Managed Funds vs. Passive Index Funds Debate video and more info below
What percentage of your investments are in actively managed funds? What portion are in passive index funds or ETFs? If you are like most investors the mix is pretty one sided. According to Vanguard, 74% of assets under management in domestic and international stock mutual funds are actively managed and only 26% are in passive funds, although that number is growing- for a reason! The number of actively managed funds outperforming their market benchmarks has actually been declining over time. A disappointing 24% did so over recent ten and fifteen year periods, only 23% did over the past 20 years and a paltry 18% did over the last quarter century.
Why have active managers done so poorly versus their benchmarks over the years? Is it possible to identify actively managed funds that will beat the markets over time? Would you be better off investing solely in passive index funds, or ETFs, or can you combine the two approaches and reach a better result? These are all questions we asked this week’s guests.
Director of Personal Finance, Senior Columnist