Why investors will shift to passive investing

Why investors will shift to passive investing. Passive investors believe that over the long run the prices of stocks and bonds will reflect the true value of those securities, so they set up long-term strategies to capture the performance of the entire market. Comparatively, active investors believe the market is inefficient, so they bet on individual securities they believe are currently either over- or under-valued to exploit the inefficiencies. Which strategy is better? The most recent study by S&P published in September of 2013, showed that, depending on the specific market sector, 71% to 93% of US managers underperformed their relevant indices over the previous three years. Passive investing through ETFs has two primary advantages that have helped it enjoy higher performance: minimal trading/fund fees and minimal tax consequences. Investors have begun to vote with their money and passive funds have claimed market share from active funds. (VIEW LINK)

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