Stock pickers are on a record run with investors. Don't be fooled, says index fund guru
Published On Feb 14, 2025, 8:06 AM
According to Charley Ellis, a veteran in the investment industry, active stock pickers are experiencing a surge in interest, evidenced by record inflows into active ETFs. Despite this, Ellis maintains that most active managers underperform their benchmarks, with 73% lagging behind after one year and nearly 95% after five years. This ongoing trend raises concerns about the sustainability of the active management business amidst the rise of passive investments. Ellis emphasizes the challenges of achieving consistent outperformance in a dense competitive landscape, where many active managers possess similar skills and resources. He warns investors to be cautious of specialized ETFs that may not align with their financial goals, particularly those that employ high leverage.
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As the article stresses the ongoing struggle for active managers to outperform their benchmarks consistently, it suggests that investments in passive index funds or ETFs could be more beneficial for long-term investors. Given the noted dangers of specialized, high-leverage ETFs, it may be prudent for investors to consider more diversified ETFs instead.
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