Source: S&P Dow Jones Indices, Dec 2018.
This underperformance of active funds is evident in good times and bad. Netwealth research of Morningstar figures – which we detailed here – shows that during the financial crisis less than half (48%) of UK active funds outperformed the tracker. We concluded that picking the active managers who can outperform is notoriously difficult, and that consistency of fund outperformance after costs and fees is rare.
In fact, a difference of just 1% in fees can make a remarkable impact to investments over time.
What you should do
To go with the smart money and access the world of passive investing you have options. You can go it on your own, but as we examine here, it’s not always as easy or as cheap to do it yourself.
Entering the world of passive equity investing does require some decisions. To be successful you can’t be an inactive participant. The Netwealth team can decide how and where to allocate your capital at a risk level that suits you. Although we mainly invest in passive investments – so you benefit from a truly competitive cost – our approach is far from passive, as we diligently act on your behalf.
Also, you should be aware of the bigger picture and the value of taking a complete view of your finances. After all, many factors are within our control when investing, as this article highlights so it makes sense to optimise how you plan for the future, rather than trying to outperform the markets.
Please remember that when investing your capital is at risk.
1 Source: Greenwich Associates. https://www.greenwich.com/asset-management/etfs-us-institutions-new-tool-choice-portfolio-construction
2 Source: S&P Dow Jones Indices, Dec 2018. https://www.cnbc.com/2019/03/15/active-fund-managers-trail-the-sp-500-for-the-ninth-year-in-a-row-in-triumph-for-indexing.html