7. Index Funds Are Better Than Active Funds in Market Downturns
Eight out of nine investors surveyed by Fidelity believe index funds offer more protection than active funds during a downturn. However, Fidelity’s research shows otherwise.
“On average, actively managed, large-cap stock funds lost less during recent bear markets than large-cap index funds. Index funds, by seeking to match the market before fees, are exposed to similar market risk as the index,” the Fidelity report found.
Therefore, active stock funds, which aim to outperform the market, might even be able to make up for any losses experienced during downturns and offer stronger returns in the long run, according to Fidelity.
