Actively Managed Versus Passive Mutual Funds: A Horse Race of Two Portfolios

31 Pages Posted: 8 Aug 2018

See all articles by Atanu Saha

Atanu Saha

Econ One Research

Alex Rinaudo

Data Science Partners

Date Written: May 9, 2017

Abstract

This paper demonstrates that the average investor would be better off by following a readily-implementable strategy of investing in a portfolio of the five largest active funds in U.S. equity, fixed income and international equity asset categories than investing in a corresponding portfolio of passive index funds. The active-fund-portfolio outperforms not only in terms of average returns, but also in risk-adjusted returns, providing far greater downside risk protection than the passive fund portfolio. This paper has important implications because its findings question the ‘wisdom’ of index investing, which has been receiving considerable attention in the financial press in the recent years.

Keywords: active funds, index funds, horse race

JEL Classification: G11

Suggested Citation

Saha, Atanu and Rinaudo, Alex, Actively Managed Versus Passive Mutual Funds: A Horse Race of Two Portfolios (May 9, 2017). Available at SSRN: https://ssrn.com/abstract=2965561 or http://dx.doi.org/10.2139/ssrn.2965561

Atanu Saha (Contact Author)

Econ One Research ( email )

1025 Westchester Ave
Suite 315
White Plains, NY 10604
United States

Alex Rinaudo

Data Science Partners ( email )

1025 Westchester Ave
Suite 315
White Plains, NY 10604
United States

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