In this week’s WSJ article, an excellent discussion on was given on active versus passive fund performance around the world. Fund performance over 5 and 10 year periods show that, while passive investments are superior in most of the world, there are some pockets where active management did better.
As I’ve highlighted in this table, U.S. stock funds investing in small, medium and large companies consistently underperformed their passive counterparts. These results help explain why index funds, and ETFs in particular, have become so popular in recent years.
The article also highlights another sad reality of active fund investing.
“…most active managers exhibit little ability to consistently beat their peers over time. “
Derek Horstmeyer, Wall Street Journal, March 3, 2019
So, what can we learn from this article?
Passive investments using ETFs don’t guarantee excess performance over their active counterparts. But, more times than not, passive investing will outperform active investing. This fact may not always be true outside the U.S., but for investors that primarily consume with U.S. dollars, passive investments in ETFs appear to be a clear winner.
Thanks for reading!
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