Another Day, Another Study Against Active Management in Your Portfolio

There is new data released from S&P Dow Jones on active vs. passive fund management performance and the results are clear: What exactly are you paying for again?

See the numbers below:

click to enlarge
ActivefundUnderperformancebyMarketCap title=
   infographic made on easel.ly and can also be viewed here

The infographic uses data from the follow table (Via businessinsider.com)

 

Table - active vs passive underperformance

 

How are such poor records possible? On any given year you can expect just under 50% of funds to underperform, but over time expenses due to the fund’s trading costs, expense ratios and other fees all start to take hold and limit growth.

This is only after 5 years! The results are even more bleak for actively managed funds after periods of decades or more.

You can see how these expenses add up over time using our expense ratio calculator:

Try the difference between a fund with an expense ratio of 0.39% (The average of an S&P 500 index fund) compared to 0.05% (Vanguard’s passively managed S&P 500 index fund) for 10, 20 and 30 years too see just how those fees add up!

 

 

Now need help finding passive investment options? Check out our Fund Spotlight Series for ideas.

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  1. Been experiencing a problem with the disqus comment system and the theme I am using for the site. Should be fixed now. If anyone is still seeing the “Comments for this entry are closed” text right above, let me know via our contact forum. Thanks!

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