Morningstar’s Report on Comparing 10 Year Returns on Active vs Passive Funds
A Morningstar article published 3/11/25 addressed this subject looking at performance over the past 10 years.
It found that less than one out of every four active funds topped the average of their passive rivals over the 10-year period ended December 2024.
Long-term success rates were highest among bond and real estate funds.
The prospective payoff for choosing a winning fund versus the penalty for picking a loser.
In the case of US large-cap funds, the distributions skew heavily negative.
The opposite tends to be true of fixed-income and real estate categories, where long-term success rates have generally been higher and excess returns among surviving active managers have skewed positive over the past decade.
Finally Morningstar found that funds in the cheapest quintile succeeded more often than funds in the priciest one (28% success rate versus 17%) over the 10 years through 2024.
Morningstar has reported innumerable times that lower cost funds almost always outperform higher cost ones. With so many funds in so many investment categories available, why would anyone pick the high cost fund?
As Jack Bogle was fond of saying, “you get what you don’t pay for”.
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