https://finance.yahoo.com/news/index-fund-assets-exceed-active-fund-assets-120639243.html * HOME * MAIL * NEWS * FINANCE * SPORTS * ENTERTAINMENT * LIFE * SEARCH * SHOPPING * YAHOO PLUS * MORE... * [yahoo_fina][yahoo_fina] Yahoo Finance [ ] Sign in Mail Sign in to view your mail * Finance Finance * Watchlists Watchlists * My Portfolio My Portfolio * Cryptocurrencies Cryptocurrencies * # Yahoo Finance Plus Yahoo Finance Plus + Dashboard Dashboard + Research Reports Research Reports + Investment Ideas Investment Ideas + Community Insights Community Insights + Webinars Webinars + Blog Blog * Screeners Screeners + Saved Screeners Saved Screeners + Equity Screener Equity Screener + Mutual Fund Screener Mutual Fund Screener + ETF Screener ETF Screener + Futures Screener Futures Screener + Index Screener Index Screener * Markets Markets + Calendars Calendars + Trending Tickers Trending Tickers + Stocks: Most Actives Stocks: Most Actives + Stocks: Gainers Stocks: Gainers + Stocks: Losers Stocks: Losers + Top ETFs Top ETFs + Futures Futures + World Indices World Indices + Currencies Currencies + Top Mutual Funds Top Mutual Funds + Options: Highest Open Interest Options: Highest Open Interest + Options: Highest Implied Volatility Options: Highest Implied Volatility + US Treasury Bonds Rates US Treasury Bonds Rates + Currency Converter Currency Converter * News News + Latest News Latest News + Politics Politics + Stock Market News Stock Market News + Crypto News Crypto News + Morning Brief Morning Brief + Bidenomics Report Card Bidenomics Report Card + Aarthi Swaminathan Aarthi Swaminathan + Adriana Belmonte Adriana Belmonte + Akiko Fujita Akiko Fujita + Alexandra Canal Alexandra Canal + Alexandra Garfinkle Alexandra Garfinkle + Alexandra Semenova Alexandra Semenova + Alexis Keenan Alexis Keenan + Andy Serwer Andy Serwer + Anjalee Khemlani Anjalee Khemlani + Ben Werschkul Ben Werschkul + Brad Smith Brad Smith + Brian Cheung Brian Cheung + Brian Sozzi Brian Sozzi + Brooke DiPalma Brooke DiPalma + Dani Romero Dani Romero + Daniel Howley Daniel Howley + Dave Briggs Dave Briggs + David Hollerith David Hollerith + Ella Vincent Ella Vincent + Emily McCormick Emily McCormick + Erin Fuchs Erin Fuchs + Ethan Wolff-Mann Ethan Wolff-Mann + Ines Ferre Ines Ferre + Jared Blikre Jared Blikre + Jennifer Schonberger Jennifer Schonberger + Julie Hyman Julie Hyman + Kerry Hannon Kerry Hannon + Luke Carberry Mogan Luke Carberry Mogan + Marquise Francis Marquise Francis + Michael Kelley Michael Kelley + Pras Subramanian Pras Subramanian + Rachelle Akuffo Rachelle Akuffo + Rick Newman Rick Newman + Ronda Lee Ronda Lee + Seana Smith Seana Smith + Sheila Bair Sheila Bair * Personal Finance Personal Finance + Home Home + My Money My Money + Retirement Retirement + Taxes Taxes + Rates Rates * Videos Videos + Yahoo Finance Live Yahoo Finance Live + Influencers with Andy Serwer Influencers with Andy Serwer + Yahoo Finance Presents Yahoo Finance Presents + Yahoo U Yahoo U + A Time for Change A Time for Change + Spotlight Spotlight + Yahoo Finance All Markets Summit Yahoo Finance All Markets Summit + Events Events + ETF Report ETF Report + Davos Davos + Crypto Corner Crypto Corner + FA Corner FA Corner + Women and Money Women and Money + America: Back in Business America: Back in Business * Yahoo U Yahoo U * Industries Industries + Saved Screeners Saved Screeners + Equity Screener Equity Screener + Mutual Fund Screener Mutual Fund Screener + ETF Screener ETF Screener + Futures Screener Futures Screener + Index Screener Index Screener * Tech Tech + Reviews Reviews + How To How To + Games Games + Video Video * Contact Us Contact Us ... ... __ Advertisement __ U.S. markets closed * S&P Futures 3,927.00 +27.50 (+0.71%) * Dow Futures 31,393.00 +180.00 (+0.58%) * Nasdaq Futures 11,933.25 +92.50 (+0.78%) * Russell 2000 Futures 1,785.60 +13.40 (+0.76%) * Crude Oil 109.75 -0.53 (-0.48%) * Gold 1,846.80 +4.70 (+0.26%) * Silver 21.82 +0.14 (+0.65%) * EUR/USD 1.0579 +0.0017 (+0.16%) * 10-Yr Bond 2.7870 -0.0680 (-2.38%) * Vix 29.43 +0.08 (+0.27%) * GBP/USD 1.2507 +0.0011 (+0.09%) * USD/JPY 127.9430 +0.0930 (+0.07%) * BTC-USD 30,269.08 +865.72 (+2.94%) * CMC Crypto 200 650.34 -23.03 (-3.42%) * FTSE 100 7,389.98 +87.24 (+1.19%) * Nikkei 225 26,739.03 +336.23 (+1.27%) Read full article Yahoo FinanceYahoo Finance 'The democratization of investing': Index funds officially overtake active managers Allan Sloan *Contributor May 22, 2022, 8:06 AM*5 min read Allan Sloan is a seven-time winner of the Loeb Award, business journalism's highest honor. There are times when simple numbers tell a big story for investors -- and this is one of them. Today's numbers involve index funds: Mutual funds that seek to replicate market indicators like the Standard & Poor's 500 Index or the Nasdaq market or the total U.S. stock market rather than try to outperform them. For the first time in history, retail investors' index fund holdings exceed their holdings in actively-managed funds, according to new numbers from Morningstar Direct. As of March 31, Morningstar says, retail investors had $8.53 trillion invested in index mutual funds, while $8.34 trillion worth of assets were invested in actively-managed funds. I think of this as Main Street's revenge on Wall Street. A spokesman for S&P Dow Jones Indices has a more elegant view: "the democratization of investing." Back in 1993, when Morningstar first began tracking index-versus-active assets, active funds had about 60 times as much in assets ($1.25 trillion) as index funds ($21 billion). As recently as 10 years ago, assets invested in index funds by retail investors were only about a third of those invested in actively-managed funds: $1.87 trillion compared to $5.47 trillion. But the tide had long since turned. By the end of last year, the asset difference was less than one percent -- $8.90 trillion to $8.98 trillion. That's why I recently asked Morningstar to do a special first-quarter analysis for me -- and why I wasn't surprised to see index funds eke out a narrow lead. Whether you call it revenge or democratization, index assets exceeding active assets is an amazing development, given that active retail mutual funds have been around roughly forever, while retail index funds didn't exist until 1976. That's when John Bogle, the late founder of Vanguard Group, got Wall Street to underwrite a tiny $11.4 million issue of what's now called the Vanguard 500 Index Fund. Story continues After a very slow start -- "Who wants to be average?" was how the fund industry attacked Bogle's baby -- index funds, especially low-cost ones, began to catch on. Why? Because year-in and year out, they began to outperform most of the active managers fishing in the same investment waters. And the difference came from lower fees and costs. Last year, index investors saved $38.6 billion in fees, according to Morningstar's math, compared to what they'd have paid to have their money in active funds. That's because the fees on index funds averaged 0.43%, or 43 basis points, less than the cost of active funds. That may be a small percentage difference, but when applied to trillions of dollars, it turns into mega-bucks. Or even giga-bucks. A major reason for lower costs across the industry comes from Bogle's insistence on pushing fees lower as Vanguard's index funds got bigger. That's due, at least in part, to Bogle setting up Vanguard as a co-op owned by its investors rather than as a conventional investment firm with stockholders seeking to make money off investors. The initial annual cost to own Bogle's first retail index fund was 0.20 percent. Now, a retail investor can buy a Vanguard 500 exchange traded index fund that costs only 0.03 percent. And some of Vanguard's competitors offer even lower costs on some index funds. As data from Morningstar show, fees for index mutual funds not only started from lower levels than their active peers, but have declined faster than active fees over the last several decades. And now with retail index funds having gotten bigger than actively-managed funds, you can almost hear Bogle cackling from the Great Beyond. Bogle, who died three years ago, had to deal with decades of mockers and scoffers who called index funds "Bogle's Folly." But Bogle talked over and over (and over and over) about what he called "The Triumph of Index Funds" and insisted that they were the wave of the future. Now that the numbers have shown us that's the case, Bogle is getting the last laugh. Vanguard group founder John Bogle makes a point during an interview at his office on the Vanguard campus, near Valley Forge, Pennsylvania, January 16, 2003. Bogle, an industry guru, has publicly criticized the investment fund industry. Vanguard group founder John Bogle makes a point during an interview at his office on the Vanguard campus, near Valley Forge, Pennsylvania, January 16, 2003. REUTERS/Tim Shaffer TMS It's clear that the shrinking of the cost difference between active and passive funds is due, at least in part, to pressure on active managers to improve their funds' performance relative to index funds. They've had to do this because year-in and year-out, most active funds have underperformed the indices, and therefore underperformed index funds. For example, 85.1 percent of actively-managed large-cap funds underperformed the S&P 500 last year, according to SPIVA data from S& P, which measures the performance gap between actively-managed and index funds. In 2021, some 79.6 percent of all domestic U.S. funds underperformed the S&P Composite 1500, the S&P equivalent of a total market index. But be aware that although owning low-cost, broad-based index funds is generally better for retail investors than owning active funds or betting on individual stocks, that doesn't necessarily guarantee smooth sailing. Especially in rocky times like the ones we're in now. Jeff DeMaso, director of research for Adviser Investments, says that as of May 10, Vanguard's S&P 500 Index Fund had dropped by 3.5 percent or more on 67 occasions since 1983. If you bought on those big down days, he says, your average return a year later was about 25 percent. However, he says, on 10 occasions, you were down for the year following the drop. So although an S&P 500 index fund will likely perform better than equivalent actively-managed funds, it does not guarantee success. But at least you'll save on fees. -- Read the latest financial and business news from Yahoo Finance Follow Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, LinkedIn, and YouTube __ * __ Advertisement [20211215205443978] [ ] TRENDING * 1. Democratic Senator Van Hollen says he has left hospital after minor stroke * 2. Swiss Re, UBS among founding buyers in carbon removal scheme * 3. Stocks to Start Week Steady Amid Growth Concerns: Markets Wrap * 4. Drugmakers propose swift pandemic response benefiting poorer countries * 5. 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