Investing Blog Roundup: Active Share, Not a Great Bet

There is, at this point, roughly half a century of evidence showing that actively managed funds generally underperform their lower-cost passively managed counterparts. (And then there’s William Sharpe’s classic piece The Arithmetic of Active Management which succinctly demonstrates that the average actively managed dollar by definition will underperform the average passively managed dollar, assuming active management means higher costs.)

But back in 2009 two researchers found that there might be a way to pick those actively managed funds that will outperform: by selecting based on “active share” (essentially, how different are this fund’s holdings relative to those of its benchmark).

Sadly, that finding hasn’t really held up well. At all.

• The Evidence Mounts Against Active Share from Larry Swedroe

Other Recommended Reading

• 22 Tips for Working with a CPA During Tax Season from Matt White
• Predicting the Future is Hard from Ben Carlson
• The Cost of Being Wrong About Interest Rates from Allan Roth
• These Tax Laws ‘Make Scofflaws of Us All’ from Peter Coy
• FTC Going After Annoying Auto Warranty Robocalls from Michelle Singletary
• New IRS Proposed Regulations on SECURE Act RMDs from Jeffrey Levine

Thanks for reading!