Active Arguments Disproved

A reader asked me to comment on a recent Forbes article titled “Active Versus Passive Management: Which Is Better?” The author, contributor Peter Andersen, asks this question while observing that, in 2014, the vast majority of active fund managers underperformed the S&P 500 Index.

However, he also notes that there have been periods “where active management of large-cap equity funds stunningly outperformed simple indexing.”

Andersen, who is the chief investment officer at Congress Wealth Management, presents a graph in which he demonstrates “evidence” showing the percentage of active managers who outperformed the passive S&P 500 index investor each year. His graph shows various periods since 1989 when active managers outperform the S&P 500. I thought I’d share my response.

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