top of page

Why active fund management has failed

(MoneyWatch) We saw Tuesday that active fund managers’ latest excuse — that rising stock correlations meant they couldn’t beat the market — doesn’t hold up to the light of day any more than the other excuses offered. Today, I wanted to dive a little deeper into why active management doesn’t work.

The reasons active managers fail are simple:

The markets, while not perfectly efficient, are highly efficient in setting prices.

The vast majority of trading is done by institutional investors. Thus, it’s hard to imagine a large enough group of victims that are going to be exploited — for some managers to outperform others must underperform.

Their costs are much higher — what John Bogle called the “cost matters hypothesis.”

2 views0 comments

Recent Posts

See All

Are Equity-Indexed Annuities a Safe Investment?

This article explains why I NEVER recommend indexed annuities to clients.  Please let me know if you have any questions. Steve =========================================== A tweet pitching equity-index

Avoid The Recency Pitfall

Larry Swedroe does a great job of talking about the importance of re-balancing.  Steve ============================================= Last year, U.S. real estate investment trusts (REITs) were the best


bottom of page