(Bloomberg Business) — Planning for retirement? You’re better off saving on fees in an index fund than trying to beat the markets.
That recommendation by legendary investor Jack Bogle is shared by 42 percent of financial professionals in the latest Bloomberg Markets Global Poll, who were asked about the most appropriate way for a midcareer person to invest for retirement. Only 18 percent said actively managed mutual funds were the best option, 17 percent recommended individual stocks and bonds, and 14 percent favored real estate.
The results suggest that many pros—people who are paid to make money for investors—are throwing in the towel and siding with Bogle, the founder of Vanguard Group who built the firm on the idea that most professionals can’t beat the market and that investors therefore would be better off in low-cost index funds. Over the past five years just 21 percent of active funds that buy U.S. stocks beat their benchmarks, according to data from Chicago-based Morningstar Inc.
“We’ve been through a period where the indexes have outperformed,” said Burton Greenwald, a mutual fund consultant based in Philadelphia. “It remains to be seen if that is a permanent shift or something that will go away.”
The support for index funds and exchange-traded funds was most pronounced in the U.S., where 52 percent of respondents favored them. That compares with 36 percent in Europe and Asia. The poll surveyed 1,280 traders, analysts, money managers and executives who are Bloomberg subscribers.
Over the past five years, investors have poured more than $1 trillion into equity products, both mutual funds and ETFs that track indexes, according to data from Morningstar. Funds run by stock pickers experienced $266 billion in redemptions in the same period.