Learn From the Fall of Active Management

Proponents of evidence-based investing, myself included, doubted whether this day would ever come. Investors are now actually paying attention to the overwhelming data supporting evidence-based investing and are fleeing active management. Some of the recent developments reinforcing this growing trend are:

Index funds are mainstream

John Rekenthaler is the vice president of research for Morningstar. Here’s the conclusion he reaches in an article titled “Do Active Funds Have a Future?”: “Passive investing is now the mainstream approach.”

Rekenthaler tallied net sales over the past 12 months for all exchange-traded funds, passive mutual funds and active funds. The results weren’t even close. Of the total sales, 68 percent were passive and only 32 percent were active. Rekenthaler believes active managers have “become the periphery.”

Read the rest of the article at The Huffington Post.