Question of the Day: What percentage of U.S. mutual fund assets are in index (or passive) funds?

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Nov 27, 2017
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Investing, Question of the Day, Stocks, Mutual Funds

Answer: 42%

From LA Times:

More from the LA Times:

These “passively managed” or “index” funds have delivered as they said they would — and have shamed many “actively managed” U.S. stock funds, the majority of which over the long run have failed to exceed or match the average market return after deducting their fees.

Passive funds were relatively slow to catch on with individual investors in the 1980s and ’90s. But over the last few years, Americans have poured record sums into the funds, including those that replicate the Standard & Poor’s index of 500 big-name U.S. stocks. In that same period, investors have yanked record amounts from actively managed funds.

Look for more NGPF resources focused on index funds as they continue to grow in popularity (and continue to beat the performance of actively managed funds). 

Questions:

  • How would you describe the trend towards passive investing since 2000?
  • Passive funds merely invest in popular indices like the S&P 500 unlike active funds which seek to "beat the market" through their investing prowess. Given the trends in this chart, who do you think is winning the performance war: active or passive? 
  • Why do you think it might be difficult to "beat the market?"

Here's the ready-to-go slides for this Question of the Day that you can use in your classroom.

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Here are some great activities to help your students understand index funds:

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NGPF has just started a new service: The Daily QuoD (that's Question of the Day in NGPF-speak!). Subscribe to our blog (right hand side of NGPF Blog homepage) and you will receive a new QuoD every weekday during the school ready to use in your classroom. Enjoy!

 

 

 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.