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Active vs. Passive Funds

Samuel A. Kiburz Jun 10, 2022
chart shows annual net flows into passive funds (in purple) vs. active funds (in orange), and their dominance for the last 11 years.

Contents

Today’s chart from Morningstar shows annual net flows into passive funds (in purple) vs. active funds (in orange), and their dominance for the last 11 years.

At this point, if you still have active funds, you have to ask yourself, “Why?”

We do not use active funds, since they:

  1. Cost on average 5x more.
  2. Underperform passive 93% of the time.
  3. Are less tax efficient.
  4. Carry additional risks due to their lack of transparency and propensity for style drift.

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