Sunday, August 24, 2014

The debate about whether to hire an active fund manager to beat the market or use a passive index fund is over

Writing in Saturday’s WSJ column “The Intelligent Investor,” Jason Zweig reviews a recent article by the “dean of the investment-management industry” Charles Ellis, who claims in the July/August issue of the Financial Analysts Journal that the “active vs. passive investment debate” is largely over. After their high trading fees and expenses, “active managers are no longer able to earn their keep,” and therefore most investors will get higher returns and pay lower fees with index funds. Ellis expects that the triumph of index investing over active fund management is generating a “wave of creative destruction” that will put many portfolio managers out of business.

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