Fund Spy

Clean-Up: How Fee Bundling Kills Performance

Jeffrey Ptak, CFA

Last week we published the latest installment of the Morningstar Active/Passive Barometer. The Barometer is a useful report--it tallies up the number of active funds that have beaten their index-fund peers over various time horizons. Using the Barometer, investors can better gauge their odds of succeeding with active or index funds across the 20 Morningstar Categories it tracks.

Among other things, the most recent edition of the Barometer found that only 24% of active funds had beaten their average index-fund rival over the trailing 10 years ended Dec. 31, 2018. It also found that the cheapest active funds were about twice as likely to succeed than the priciest funds. Above all, the Barometer's findings buttress the argument that cost matters.