According to an article published the The Globe and Mail, a financial expert made comments alleging that if you can select a “good” actively managed mutual fund, it will help maximize returns and limit market volatility as the stocks enter into bear market territory, or said another way, when they drop by about 20% from their peak over a sustained period of time.
The idea is that the manager will be better at allocating your assets compared to you, who will panic and just sell assets at a loss. However, according to research published by Vanguard, on average, active managers underperform their benchmark indexes. It would seem obvious from the quote, that a “good” active manager would perform better than average but unfortunately, according to other studies, “regardless of asset class or style focus, active management outperformance is typically short-lived” so finding a “good” actively managed fund seems to be about as easy as finding a “good” stock. Based on mounting research, the best approach for most people is to buy and hold ETFs or Mutual Funds that are benchmarked to the whole market rather than expecting a professional or themselves to perform better through active management.
Credit Critics Conclusion:
Fact Check: “Active Management Can Protect from Downside Risk”