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Index Investing Beats Active Management (Again)

Again!  The message is clear.



Chalk up another win for index investing in the active vs. passive management debate. Standard & Poor’s semi-annual update on how often fund managers beat their benchmarks once again shows that paying higher fees for outperformance is usually a losing proposition.

The latest S&P Index Versus Active (SPIVA) scorecard reveals that with few exceptions, active fund managers underperform their respective benchmarks the great majority of the time. Frank Luo, senior director of S&P Indices Global Research & Design, sums it up like this:

Over the past three years, which can be characterized by volatile market conditions, 64 percent of actively managed large-cap funds were outperformed by the S&P 500, 75.1 percent of mid-cap funds were outperformed by the S&P MidCap 400 and 63.1 percent of the small-cap funds were outperformed by the S&P SmallCap 600.

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