One of the most important decisions an investor has to make when building a portfolio is whether to use active or passive investments. Active fund managers pick and choose stocks and bonds they think are the most likely to outperform the market while passive investments give investors broad market exposure. Proponents of each investment style often engage in heated debate about which approach is the right one.
This week, Morningstar analysts and strategists--including our director of personal finance Christine Benz--will weigh in on active and passive investing techniques. We'll clarify the state of the debate, look at ways to optimize both active and passive approaches, and offer suggestions on the best ways to combine the two. On Friday, several Morningstar experts will sit down for a live video roundtable discussion on getting the most out of active and passive strategies.
Stay tuned to this landing page throughout the week. We'll release a new series of reports each day. Afterward, you can return to this page to check up on anything you may have missed.
Active/Passive Investing Week Highlights
- Active or Passive Strategies: How to Choose?
- Index Versus Active: What the Data Say
- Benz: Top Tips for Active Fund Investors
- Topnotch Active Funds for Core-and-Explore Investors
- Top Index-Fund Choices for Beginners
- The Hidden Costs of Indexing
- Should You Switch to an ETF From a Traditional Index Fund?
- Special Roundtable Report: Beyond the Active-Passive Divide
Monday | September 12: Clarity on the Active/Passive Divide
Hear from Morningstar's Don Phillips, Russ Kinnel, and Christine Benz as they explore the pros and cons of using an active or a passive strategy.
Active or Passive Strategies: How to Choose?
Decide what attributes you value most, then go from there.
Silly Season for the Active/Passive Debate
Here are five of the goofiest arguments for and against indexing.
Index Versus Active: What the Data Say
Focusing on low expenses helps investors succeed, regardless of whether they take the active or passive route.
It's time for the leaders of the index movement to step up and reclaim the intellectual honesty that their early supporters advocated, says Morningstar's president of fund research Don Phillips.
The Odds Favor Index Investors
A low-cost index portfolio has the greatest probability for meeting long-term financial goals, says Rick Ferri.
From the Archive: What the Data Say on Active vs. Passive Funds
Morningstar's John Rekenthaler on the percent of active managers who have outperformed, if active is really better in some categories, and the strongest predictors of success. (video)
J.P. Morgan Funds: Active vs. Passive
What style of investing wins over time?
Knowledge@Wharton: If Index Funds Perform Better, Why Are Actively Managed Funds More Popular?
New research suggests investors use active management in a kind of arms race to unearth a limited number of bargain-priced investments.
Tuesday | September 13: Better Active Investing
We tackle how to get the most out of an active investment strategy. Christine Benz will share our favorite active funds and discuss how to build a portfolio of strong managers.
Benz: Top Tips for Active Fund Investors
Morningstar's director of personal finance says these key elements and the right mind set are critical to successfully investing in actively managed funds.
A Field Guide to Active Management Styles
Understanding an active fund's style is essential to using it successfully.
Topnotch Active Funds for Core-and-Explore Investors
These fine offerings exemplify truly active strategies.
A Wide-Moat Approach to Active Investing
Morningstar's Paul Larson explains how he narrows down the stock universe into a portfolio he thinks will beat the market. (video)
Why Active Funds Outperform Closet Index Funds
Yale professor Martijn Cremers explains why funds that hew closely to their index tend to underperform their more active brethren. (video)
Hands-On Investors: Don't Make These Mistakes
Even more seasoned investors can inadvertently water down their carefully planned portfolios, says Morningstar's Christine Benz. (video)
Top Tips for Active-Fund Pickers
Morningstar's Christine Benz on sizing up management, benchmarking fees, assessing strategy, and keeping the right mind set. (video)
From the Archive: Find Out How Active Your Fund Is
Active share shows whether a portfolio is an index-hugger or a maverick.
From the Archive: Go Active or Go Home
Active funds that deviate only slightly from the index may not be worth it.
Janus: The Case for Active Management
Using skill and insight to construct portfolios remains the best opportunity for long-term investors to generate alpha.
Research Affiliates: Whack! Today's Misaligned Manager Selection Process
Stuck in a sandtrap. How investors focus on the wrong objective.
Pioneer: The Risk of Fixed Income Indexing vs. Active Multi-Sector Management
A Different Future for Fixed Income Investors?
Wednesday | September 14: Better Passive Investing
Morningstar's ETF team will look at how to pick the best passive funds and will also examine some of the hidden costs of indexing. Christine Benz will share our favorite index funds and offer five pitfalls passive investors should avoid.
Top Index-Fund Choices for Beginners
These fine offerings exemplify truly passive strategies.
Tips on Picking the Best Passive Fund
Look for low fees and make sure you understand the underlying index before jumping into a passive fund, says Morningstar's Paul Justice. (Video)
Five Indexing Pitfalls
Morningstar's Christine Benz shares her thoughts on how investors can avoid getting burned by their investments. (Video)
Should You Switch to an ETF From a Traditional Index Fund?
Costs and tax considerations are key factors when pondering such a decision.
The Hidden Costs of Indexing
Picking the right index could matter more than an index fund's expense ratio.
Indexing and ETFs
We summarize the major equity index providers and the ways to gain access to them through ETFs.
Why Index Funds and ETFs Add Value to Your Retirement Toolkit
Ease of use, dividend income, and tax efficiency are among the key advantages of investing in these vehicles.
Research Affiliates: Equity Allocations -- Thinking Outside of the Box
Looking at a different way of constructing the equity portfolio using the concept of "active share"�a measure of how much active equity portfolios actually deviate from their benchmark indexes.
Investor Solutions: The Role of Rebalancing
A disciplined rebalancing practice can add a lot of value to a long term strategic asset allocation program.
Thursday | September 15: Where Active and Passive Intersect
Choosing between active and passive investments is not an all-or-nothing proposition. On Thursday, we will look at combining the best of both worlds in your portfolio.
Where Active Management Is Adding Value
Data seem to support the approach of using index funds for core positions and active management for smaller-cap and emerging-markets positions, say Ibbotson's John Thompson and Larry Cao.
Accidental Portfolio Managers
ETFs can be used effectively, but those who trade too often and venture into asset classes they know little about are setting themselves up for disappointment.
No Truly Passive Approach to Dividends
Morningstar's Josh Peters says that even if investors outsource stock-picking they still need to put in the work to understand why they are buying dividend stocks. (video)
Active ETFs: A State of the Union
Assets remain low, but interest abounds, and a game-changer is ahead.
Let's Not All Become Fundamental Indexers Just Yet
The air is coming out of the argument that fundamental indexing is a revolutionary innovation.
Options Are Ideal for Lowering ETF Risk
Dan Haugh from PTI Securities notes how using options adds protection to an ETF investing strategy.
An Aggressive ETF Portfolio for Retirees
See what we recommend for risk-tolerant ETF investors with 20-plus-year time horizons.
A Moderate ETF Portfolio for Retirees
See what we recommend for risk-averse ETF investors with a 15- to 20-year time horizon.
A Conservative ETF Portfolio for Retirees
See what we recommend for risk-averse ETF investors.
Friday | September 16: Video Roundtable--Beyond the Active-Passive Divide
Hear Morningstar investment specialists' take on the debate and learn how to get the most out of your active and passive investments.