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Ferri: Why Passive Portfolios Are Better Than Active

Research by author Rick Ferri took the active-passive debate beyond individual investments and found passive-oriented portfolios will likely outperform active portfolios across time spans, number of holdings, and asset types.

Christine Benz: Hi. I’m Christine Benz for I recently attended the annual Bogleheads Conference, where I had the opportunity to sit down with investment advisor and author, Rick Ferri. We discussed his recent research on indexed versus actively managed fund portfolios.

Rick, there’s been a lot of research comparing how actively managed funds have done versus their passively managed counterparts. You recently issued a white paper, where you looked at actively managed portfolios versus index fund portfolios. I’d like to start by discussing briefly your methodology, how you assemble those active portfolios and also what you looked at in assembling the index fund portfolios.