Is it time to switch into active funds?

For a long time, we've preferred passive funds over active funds. But are passive funds starting to lose their competitive edge?

For a long time at MoneyWeek, we've preferred passive tracker funds (which just try to give you the same return as the underlying market) to actively managed funds (which aim to beat it). While it's true that some active fund managers succeed in outperforming the stockmarket, research still shows that on average they don't. And even if you pick a good one, the chances of them continuing to outperform consistently, year after year, are slim to non-existent.

This is partly because beating the market is tricky, but mainly because the high fees that active managers charge eat into your returns so significantly. So rather than get charged a lot of money in return for what's likely to be under-performance, we think you should pay a much smaller fee to get the market return.

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Piper Terrett is a financial journalist and author. Piper graduated from Newnham College, Cambridge, in 1997 and worked for Germaine Greer and for Adam Faith’s Money Channel before embarking on a career in business journalism. 

She has worked for most top financial titles, including Investors Chronicle, Shares magazine, Yahoo! Finance and MSN Money. She lectures part-time at London Metropolitan University and is the author of four books.