SAN FRANCISCO, CA: Today InvestingNerd released a new study that finds the majority of actively managed mutual funds failed to outperform the market index over the last ten years. In the study, only 24% of professional investors were able to beat the market over this period.
As of December 2012 there was over $7 trillion invested in actively managed U.S. mutual funds and ETFs – almost three times the amount invested in passive funds. Yet the majority of these people who invested their assets over the past decade would have done better by simply investing in a passive index fund, typically at much lower cost.
“Active asset management may appeal to investors looking to beat the markets, but the data shows time and time again that most people would be better off going with index funds. Our study shows that going this route benefits most investors over the long run because, on average, active managers charge more in fees than the value they create. The after-fee returns are simply not worth the costs.” – Joanna Pratt, VP of Financial Markets at NerdWallet.
Key Findings of InvestingNerd Study:
Only 1,863 of 7,630 actively managed products, or 24%, outperformed the index average return of 7.30%.
While active managers outperformed the index by 0.12% before fees, they then charged more in fees than the value they created.
For risk-averse investors that prefer funds with lower volatility, active management is 1.96% less volatile than passive management across all asset classes.
In effort to help investors pick better funds, InvestingNerd launched a Mutual Fund Screener that allows investors to find, search and compare over 15,000 funds. The tool allows investors to filter based upon these variables:
- A fund’s type, size and style, minimum investment, and expense ratio
- Specific fund families, manager’s tenure and share class
- Measures of performance, including R-squared, α, β, and risk-adjusted returns
The screener also allows investors to compare the details of up to 4 funds at a time, providing unbiased quantitative recommendations based on key metrics. The screener aims to highlight critical factors often overlooked or underemphasized in assessing a fund’s future performance.