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.
A few years ago, crypto hedge funds were all the rage. As cryptocurrencies rose in value, hundreds of hedge funds specializing in digital assets launched to try and capitalize on investor demand. Some of these funds recorded double-digit gains in 2020 and 2021 as cryptocurrencies surged in value. However, this year, cryptocurrencies have been under Read More
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