Investing: The truth about actively managed funds
They say you get what you pay for, but mutual fund investors often get less. Actively managed stock portfolios find it hard to achieve the returns of low-cost index-tracking funds, and that was especially true last year.
In 2003, when the bull market began, 61 percent of actively managed funds specializing in American stocks beat the return of the Standard & Poor's 500-stock index, according to the research firm Morningstar. The following two years produced similar results, but in 2006 the figure plunged to 32 percent.
Greater volatility and a leveling off in the relative performance of shares of smaller companies, which many managers favor and which showed far more strength early in the bull market, accounts for some of the dramatic falloff. But there are enough other factors for some analysts and financial planners to conclude that last year is the rule, not the exception.
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