Active vs Passive Investing: Is there Still a Place for Stock Pickers?
(Note: companies that could be impacted by the content of this article are listed at the base of the story (desktop version). This article uses third-party references to provide a bullish, bearish and balanced point of view; sources listed in the “Balanced” section)
At some point in 2019, the market share of passive funds will top 50%, marking an inflection point in the active versus passive debate. Since the end of 2006, investors have withdrawn approximately $1.2 trillion from actively managed U.S. equity mutual funds and have allocated some $1.4 trillion to U.S. equity index funds and exchange traded funds (ETFs). At the end of 2018, mutual funds and ETFs that passively track indexes held 48% of market assets. By definition, active portfolio management focuses on outperforming the market compared to a specific benchmark, while passive portfolio management aims to mimic the investment holdings of a particular index. But, as we shall see, the line between passive and active investing is not black and white.
