These are the biggest myths about passive investing that traders need to get over, according to Goldman Sachs
But is Wall Street’s constant carping about a trend that has dramatically lowered the cost of investing (while sapping some of the asset-management industry’s fee-based revenue) really justified? Or are active managers simply struggling with a case of sour grapes, considering how few of them manage to outperform indexes like the S&P 500, which retirees can gain exposure to via low-cost index funds like the SPDR S&P 500 ETF or the Vanguard S&P 500 ETF.
The latest data from S&P Dow Jones Indices, shared with MarketWatch last week, found that 57% of actively managed funds benchmarked to the S&P 500 underperformed the index during the first half of 2024 — a slight improvement over the 60% that underperformed in 2023.
As money continues to pour into passive funds while simultaneously flowing out of their actively managed rivals, a team of equity strategists at Goldman Sachs Group led by David Kostin, the bank’s chief U.S. equity strategist, decided to delve into some of the more popular criticisms of passive management. They found that, in every case, these concerns were based on misconceptions that weren’t supported by the data.