Survey: Investors better off with passive index funds

Index funds outperformed actively managed funds regardless of whether returns were measured by asset-weighted average, median, or a simple average, the survey adds.

“Past academic studies have indicated that professional investors are not worth the cost because the after-fee return is lower than that of the market index,” the report states. “Theoretically, active managers as a group will have a hard time outperforming the market over the long-run because professional investors are a large portion of the market and once fees are netted out, they are likely to underperform a passive index.”

Among the report’s additional conclusions:

• Only 24% of professional investors beat the market over the past 10 years
• Index funds outperform actively managed funds by 0.80% annually, but active managers have lower risk
• Active managers outperform the index by 0.12% before fees, but charge more in fees than the value they create
• Large funds significantly outperform small funds with much higher returns and lower risk
• Smaller stocks are riskier than large stocks, but don’t necessarily deliver higher return
• Growth stocks significantly outperformed value stocks over the past decade