On the other hand, an actively managed fund might use one of those indexes or another as a benchmark but handpick their stocks and the degree of their exposure to any given stock. While this strategy can come with a higher expense, that personal touch can theoretically mean a fund manager can beat the index and deliver better returns to investors.
However, Morningstar data show that this year, through Oct. 31, roughly 58.6 percent of actively managed funds have failed to beat their benchmarks. And over the last 10 years, 73 percent of actively managed funds have fallen short.
Advisors point out, however, that when the stock market is doing well, it's more unlikely for an actively managed fund to outperform its benchmark. In more uncertain times, actively managed funds can do better.
"We've seen some actively managed funds really add value to a portfolio, especially in times of volatility and when market sentiment is against [a certain market segment]," said certified financial planner Avani Ramnani.