- Mutual funds have been underperforming their benchmarks
- Investors interested in these investment styles may be better off with a low-cost, index-based ETF
- S&P Dow Jones Indices continuously paints a stark picture that many of these actively managed mutual funds may not be worth the cost
Mutual funds have been underperforming their benchmarks and issuing high fees as well to add insult to injury. Alternatively, investors interested in these investment styles may be better off with a low-cost, index-based exchange traded fund.
S&P Dow Jones Indices continuously paints a stark picture that many of these actively managed mutual funds may not be worth the cost, Todd Rosenbluth, S&P Global Market Intelligence Director of ETF & Mutual Fund Research, writes in a note.
According to the latest S&P Indices Versus Active Funds, or SPIVA, U.S. Scorecard, just 25% of all domestic equity mutual funds outperformed the multi-cap S&P 1500 Index in 2015, with only 19% and 22% outperforming over their respective three- and five-year periods.
Over the one-year period, mid- and small-cap growth funds were especially poor performers. For instance, only 20% of all mid-cap growth funds outperformed the S&P MidCap 400 Growth Index, and investors paid an average 1.3% fee on mid-cap growth funds for the that underperformance as well. In comparison, mid-cap ETFs have an average expense ratio of 0.42%, according to XTF data.