Active Equity Fund Investors Beat Indexers in Q2: Dalbar

A buy-and-hold strategy proved to be the best approach for equity investors during the first half. According to the Dalbar study, a hypothetical $100,000 equity portfolio lost $3,081 during the first half of the year, compared to a $5,028 loss for a comparable portfolio owned by the average investor. 

Also during the first half, the average equity sector fund investor withdrew money from almost all sector funds except precious metals, which saw significant net inflows, and technology funds, which experienced very slight net inflows, according to Dalbar.

In a separate report, Morningstar's director of global ETF research, Ben Johnson, found that slightly more than half of actively managed funds outperformed their average index peers during the first half of 2020, which is a higher percentage than many previous comparable periods. Over the 10 years ended June 30, 2020, however, only 24% of all active funds outperformed their average passive rivals, according to Johnson. 

In general, passive U.S. equity index funds outperformed their active counterparts during the 10-year period but the reverse was true for active bond funds and foreign stock funds, according to Morningstar.

Johnson cautions, "Investors should understand the chances of finding a successful active fund as well as the size of the prospective payout for picking a winner and penalty for landing on a loser." 

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