Bloomberg – In 2011, about 79 percent of large-cap mutual fund managers trailed the Standard & Poor’s 500 Index (SPX), according to Morningstar Inc. The average equity mutual fund lost almost 3 percent last year, compared with a 2 percent gain for the S&P 500, says Lipper U.S. Fund Flows. Hedge funds fared even worse, with an average loss of 5 percent, according to Hedge Fund Research Inc.
These weren’t aberrations. Numerous studies show that most active funds have underperformed passive benchmarks over time, primarily due to costs and fees. Not surprisingly, most academics and many market professionals are recommending passive investing. Even superstar active managers such as Peter Lynch and Warren Buffett have advised most investors to hold index funds.
