Are there funds that have performed better than those that follow the total stock market?

I keep hearing about passive and indexed funds and how they have performed. Are there any other funds out there, not following the whole market, that have performed better than funds that follow the total stock market? For example, like in the the past 5 or 10 years?

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July 2017
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Hello,

The major difference between an active managed fund and a passive fund is the word “active”, in which the manager actually seeks a different investment strategy, instead of simply following a preset index.  You used the phrase, “total market”, in the question, which means any passive index fund that follows the total market index essentially uses all companies in the market.  You may begin to wonder how one fund family’s “total market” differentiates from another fund family’s “total market’ if they all follow the same index.  You’re correct: they are almost no difference, except one family could charge less fees than the other, which may translate to a higher return to you.

What a boring investment would be if everyone follows the same index! That’s why there’s a breed of active asset management.  Managers seek to follow a different path and prefer zig when everyone else zags.   Instead of doing a “total market”, the managers may select only the small capital companies or international markets to invest.  With this type of activing picking/managing, life gets exciting, but it fraught with risks, rewards, high turnovers of the underlying investments, and also the corresponding increased fees.

As you can see, there’s no right or wrong answer to choose what the right style for you.  Even though studies show index funds beat the active funds in many categories, but in certain areas, such as international and emerging markets, active management seems to be the leaders. You can pick one or the other, or mingle them up to have the best of both worlds.   Isn’t investment fun?  Best!

July 2017
July 2017
July 2017
July 2017