Active vs passive not adequate to assess index-based benefits

etfs

Although as a group ETFs give a return below that of the market, in some cases they outperform active managers and a recent study has shown the aggregate expense ratio of the overall European listed ETF market as being cheaper than that of active funds

When considering index-based and managed funds nowadays, in order to make the comparison correctly, one needs to do more than weigh up active versus passive, as was the case in the past. Trackers, or index-based products, give the basic advantages of collectives: they reduce stock specific risk, allow smaller investors to get access to shares or bonds and share costs. Of course, their key feature is that they are designed to track an index and not to add value in terms of alpha, which is what the active managed funds aim to do. Therefore, since all forms of index funds charge fees they wi...