I read an article on the NY Times website site regarding a study conducted by S&P Dow Jones Indices about how actively managed mutual funds are inconsistent with their performance numbers. Basically the best funds become the worst funds. Very few funds can consistently outperform their benchmark and their peer group. Nothing new here, we all heard the adage past performance doesn't guarantee future results. However, do we heed this advice? My gut tells me no, however with the rise of ETF my brain tells me yes more investors are turning to passively managed funds. I don't have any evidence but If I have the time at work I will try to gathering some to support and share them with you. In my opinion, the asset growth of ETFs can be considered strong evidence.
In my IRA I am a mostly passive investors investing in the lowest cost board based highly liquid ETFs. I do own one actively closed end fund that's because its buys alternative assets which the universe is relatively small when compared to stocks and bonds. However once that universe's assets grows to critical mass, the alpha potential of the fund I suspect will drop and then I will go passive or get out that universe all together. The reason I am passive in my IRA is very simple, the lower the fees, the more I keep, the more my money compounds over the years. In addition, I am a professional and I know how to manage money but I am not a professional money manager.
Since I work in the industry I will try not to make a judgment on active investing. However, I sort of did by saying my mind tells me more investors are heeding the advice and are going passive. Also that my IRA is invested in passively managed ETFs. The link to the article is below contains the study. Enjoy
http://www.nytimes.com/2014/07/20/your-money/who-routinely-trounces-the-stock-market-try-2-out-of-2862-funds.html?_r=3
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