Indexing Versus Active Mutual Fund Management

Abstract

The purpose of this paper is to examine the benefits of active mutual fund management investing versus index funds. In general, we find that index funds outperform actively managed funds for most equity and all bond fund categories on both a total return and after-tax total return basis, with the exception of actively managed Small Company Equity (SCE) and International Stock (IS) funds. These results should be viewed with caution, however, as there is evidence that actively managed funds outperform the index funds during periods when the economy is either going into or out of a recession.