I read an article on Barrons entitled, “Active Stock ETFs Are Thriving. Index Funds Will Probably Beat Them.” Which is a good title right? After all, with Index investing, you get:
Lower Costs: Index funds typically have lower management fees compared to actively managed funds because they aim to replicate the performance of a specific market index rather than employing a team of portfolio managers and analysts.
Diversification: Index funds provide broad exposure to an entire market or sector, which can help reduce individual stock risk.
Consistency: Index funds aim to match the performance of the underlying index, so there is less variability in returns compared to actively managed funds, which may underperform or outperform the market.
Passive Management: Index investing requires less active decision-making and research, making it a more hands-off approach suitable for long-term investors or those who prefer simplicity.
But the interesting thing about this Barron’s article is that they compared the index funds to the “active” DFA funds! They were touting how good the DFA funds are are are going to be with the point that “active” funds are good and are going to be good! Even Barrons gets it wrong…DFA funds are NOT active funds!!
So, maybe a better title is: “Index Stock ETFs Are Thriving. Index Funds Are Winning.”