"Active Funds vs Index Funds 2014: Managed Mutual Funds Underperform Passive Funds, Continuing Losing Streak"

"The Dow Jones Industrial Average and the S&P 500 hit record highs in 2014, but Wall Street’s best and brightest mutual fund managers fell short and failed to keep pace, costing investors billions in missing gains—and fees. Passive funds that mirror popular indexes outpaced more expensive actively managed funds for the year.

Here’s what that means in real terms:

If you had put $10,000 into the average mutual fund guided by a seasoned manager on Jan. 1, 2014, you’d have seen an average return of $1,148 for the year.

As of the market’s close on Dec. 31, you’d have a total of $11,148, according to data from investment research firm Morningstar.

That total doesn’t include the average 1 percent that would get subtracted in fees to, among other things, help pay the fund manager’s salary. In your case, that 1 percent would lop off about $111.48 from your annual return.

$11,148 - $111.48 = $11,036.52

By comparison, if you had opted to put $10,000 in a passively-managed fund at the start of 2014, you would’ve realized an average return of $1,446, totaling $11,446—with fees as low as 0.2 percent owed, or $22.90.

$11,446 - $22.90 = $11,423.10

$11,423.10 - $11,036.52 = $386.58


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