They also tend to have lower expenses.
The stock market is a vehicle by which money is transferred from those without patience to those with patience.
My portfolio has outperformed the market over the past 25 years by a substantial amount. I own 15 stocks, all of them household names (Coke, PG, Morgan Stanley, Aflac) that pay dividends and increase their dividends every year. When I have $$ to invest, I look at the 2 or 3 stocks in the portfolio that are getting hammered, and I invest in those stocks. Unlike actively managed funds, I don’t have to worry about a Morningstar rating. That’s why these funds underperform the average, i.e., b/c fund managers need short term results, so they join the investment pack, resulting in average returns, which become below average when their 2% cut is taken out. By contrast, I put my $$ in beaten down stocks (which have decades-long track records of delivering returns), and I can patiently wait for them to recover and prosper. Or, more simply, buy low and don’t sell.
Managed funds are a waste of good money. This report proves it again. The managers are not worth what they are paid.
“many active managers argue that the future will be different”
And how long have they been saying this? About as long as there have been index funds from what I have seen.
bfl