Investors today are pulling money out of their actively managed funds and putting it into U.S. stock index funds, according to new research from Morningstar.
Why is this? “Many argue that buying and holding the broad market (whatever that market may be) generates better results than trying to beat that same market through actively selecting securities,” Susan Dziubinski, senior product manager at Morningstar.com, wrote in a recent blog post.
Dziubinski pointed to a study from last year that she said confirmed that index funds have outperformed active funds over time in many investment categories.
She noted, however, that some index funds are better than others. “The best do a good job of closely tracking their indexes, minimizing costs and following sensible rules-based indexes.”
Investors looking for the best index ETFs and mutual funds can start with the Morningstar Analyst Rating. Those that earn the highest rating, Gold, are those analysts consider most likely to outperform over a full market cycle.
To represent a variety of fund families and market indexes, we picked 12 mutual funds and ETFs from Morningstar’s “Best Index Funds” list. All the funds landed in one of the broad U.S. stock Morningstar Categories and earn a Gold rating as of February. Visit Morningstar for the full, alphabetical list, along with their other best-fund picks.
(Images: Chris Nicholls/ALM)