Moreover, many investors may be put off by the high fees on top of the underperformance in actively managed funds.

“We found that over the past five years ending in 2014, active funds levied higher charges, at least double those of passive funds, regardless of where the funds were domiciled,” according to Utkarsh Agrawal, Senior Analyst, Research & Design, S&P BSE Indices. [Indexology® SPIVA Global Actively Managed Report]

In contrast, the broad index ETFs are much cheaper than actively managed equity funds. SPY has a 0.09% expense ratio, IVV has a 0.07% expense ratio and VOO has a 0.05% expense ratio.

For more information on the ETF industry, visit our current affairs category.

Full disclosure: Tom Lydon’s clients own shares of SPY and XLP.

Max Chen contributed to this article.

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