The Mutual Fund and ETF Landscape in 2024
What's the probability that your funds or ETFs will "beat" the markets over the next 10 or 20 years? If they are "active" funds, meaning the fund manager tries win by picking stocks or timing when to get in or out, the odds aren't very good.
Our Value Added IndexingTM approach utilizes funds that look to to match the return of a particular area of the capital markets. The benefits, relative to traditional "active" stock picking, are superior long-term performance, broad diversification, consistency, low cost, and tax efficiency.
This approach is grounded in research. A recent study by Dimensional Fund Advisors, The Fund Landscape 2024: A Study of US-Domiciled Mutual Fund and Exchange-Traded-Fund Performance, confirms that most active money managers do not outperform their benchmarks.
Here is Dimensional's study: 2024 Fund Landscape Report
Investors may be surprised by how many funds disappear over time. At least half of the equity and fixed income funds were no longer available after 20 years. Including these nonsurviving funds in the sample is an important part of assessing fund performance because it offers a more complete view of the fund universe and possible outcomes at the time of fund selection. The evidence suggests that only a low percentage of funds in the original sample were “winners” — defined as those that both survived and outperformed benchmarks.
David Rappaport, CFP®