(Index Fund Advisors) - The evidence against active management keeps mounting. As we've reported in the past, S&P's longtime SPIVA research series has consistently found that a vast majority of index funds outperform over time those run by active managers.
Separately, ongoing studies by independent researchers at Dalbar show that the average investor — who tends to capitulate to emotions and sell at the worst times — has significantly underperformed the S&P 500 index over the longer haul.
Throw in a growing body of academic research with roots going back 50 years or more from Nobel laureates like Eugene Fama and Harry Markowitz and it's not surprising to see passive investing's media spotlight ticking up a bit in recent years. In fact, the rise in popularity of index funds spurred a best-selling book last year by veteran Financial Times correspondent Robin Wigglesworth.1
In "Trillions: How a Band of Wall Street Renegades Invented the Index Fund and Changed Finance Forever," he observed: "Passive investing now likely accounts for over $26 trillion (globally), more than the entire gross domestic product of the United States, and is a force reshaping markets, finance, and even capitalism itself." (To watch the first of IFA President Mark Hebner's series of video interviews with Wigglesworth, click here.)
Besides mainstream books and coverage by major media outlets such as the Wall Street Journal, the Financial Times and Barron's magazine, index-themed investment stories have increasingly made it into cable news coverage. Throughout the day, these channels pump television's airwaves with reports based on hourly swings in stock prices, prognostications by active managers and corporate press releases.
The growing education and appreciation of passive investing, however, hasn't escaped at least one such purveyor of news focused on short-term market gyrations. CNBC, the pioneer in this field, over the years has stepped up its spot reporting of indexing's gains — both in terms of fund asset growth and performance. In fact, by 2019 we started seeing reports like the video below, which put a spotlight on the results of SPIVA's ongoing research series.
It's a message that in recent years has become less of an anomaly by the broadcaster. Bob Pisani, the network's senior markets correspondent, continues to file reports with similar messages chronicling index funds' longer-term outperformance. So does his colleagues at CNBC. Indeed, the network these days regularly covers SPIVA research results — including S&P's more recent findings, which showed the same pattern of lagging returns by active management across different fund types and asset classes.2
By Murray Coleman
Financial Writer - Index Fund Advisors
