AssetPreserver News

No surprise. Bond index funds win again. Equity index funds win in most categories.

Standard & Poors released its semiannual study on index funds vs. managed funds (SPIVA). It covers 1, 3, and 5 years.

The study found that on an asset-weighted basis — measuring returns by the invested dollar rather than percentage of funds — index returns beat actively-managed fund returns in all 13 fixed-income categories over one and three years, and in 11 of 13 categories over five years.

One surprise was mortgage-backed securities. The index won around 98% of the time for 1, 3, and 5 year periods.

Index funds generally have much lower costs than managed funds, often 1% or more.

For index bond funds, there is usually less than 0.1% difference in cost between the index bond fund and the index it tracks.

What does this mean for me?

For mortgage-backed securities, the answer is easy: the index fund won 98% of the time.

Since bond index funds have low expenses, they have a much better advantage than managed bond funds, especially long term.

Managed REIT funds have an advantage over corresponding index funds.

For the most part, equity index funds beat managed funds.

Resources

View the full S&P SPIVA study