Why Indexing Beats Stock-Picking
Fees aren't the only cost of active management.
The math adds up.
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Professional equity managers -- of mutual funds, pension funds or hedge funds -- use a number of methods to try to beat their benchmark index. These broadly fall into one of two camps, “active” and “passive,” and a debate over which gets better results has raged since at least the late 1960s.
Passive managers have been able to claim the upper hand by pointing to the well-known tendency of active equity managers to underperform their benchmark index.