When it comes to your portfolio, what's the better option: Passive or active funds?
Why pay for professional management, the argument goes, it it costs more and the returns are so-so?
The eternal Wall Street struggle can get as fierce as the long-simmering rivalry between the Yankees and Red Sox.
One one hand, active managed funds, typically mutual funds, are overseen by investment professionals hoping to outperform specific benchmarks. Because active managers are able to make informed and sometimes defensive decisions, the fees incurred are typically much higher
Passive vehicles, meanwhile, seek to mimic the holdings and returns of a specific market index, like the Standard & Poor's 500 Index. These mainly hands-off passive funds, including index funds and ETFs, do not attempt to beat the market, merely match the performance. Hence the lower fees and broad popularity.
Lately, it appears the odds are turning slightly in favor of active management pros.
According to Morningstar, active funds have outperformed the broader market this year, up 3.04 percent from January to April, with passive funds up 2.80 percent over the same time period.
That's the best year for active managers since the financial crisis with nearly 50 percent of active managers beating their benchmarks. The research firm found actively managed U.S. equity funds have seen about $700 billion in outflows since 2006.