From 2007 through 2015, $835 billion was yanked out of active mutual funds and $1.2 trillion plowed into index funds. Below is the most compelling image I’ve seen to explain why this secular change is taking place.
Index funds aren’t perfect, as Ben recently laid out, but assuming you can control your behavior, which is more important than whether you own every stock in an index or only 20% of them, indexing gives investors the best chance of capturing whatever returns the market will deliver.
Check out the whole report from Vanguard, who, with $1 trillion in actively managed funds, knows a thing or two about the topic.
Michael Batnick is a managing partner at Ritholtz Wealth Management. He is the co-host of Animal Spirits, What Are Your Thoughts, and The Compound and Friends. For disclosure information please see here.