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Chuck Jaffe: How investors can sabotage performance by switching to index funds

Mutual-fund investors are actively moving to passive funds in order to improve performance.

While they’re right to expect better results from the funds they buy, they may be sabotaging themselves just by making the change, and making it worse depending on how they ultimately manage their money in index funds and ETFs.

It’s part of the confusing battle of active versus passive management, where there is a clear winner, but where the edge is easily lost.

To see why — and to help figure out if you are among the investors losing the passive advantage — let’s look at industry trends and the most recent Active/Passive Barometer from Morningstar Inc.

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