From CNBC: 2025-02-14 08:17:41

Stock picking is challenging – 73% of active managers underperform benchmarks after one year, 95.5% after five years, and no one outperforms after 15 years. Charles Ellis believes the rise of passive funds won’t kill active management but that active managers will continue to struggle to find an edge.

ETF industry expert Dave Nadig notes that active managers aren’t disappearing, as evidenced by record inflows last year. While active ETFs saw success in January, the majority of flows come from unsophisticated investors into index funds. Ellis is concerned about the growth of ETFs and the potential dangers they pose to investors.

Technology has leveled the playing field in the markets, making it difficult to gain an edge. Ellis and Nadig agree that active management is possible, but finding it in advance is a challenge due to the canceling out effect of skilled managers. Ellis warns of the dangers of specialized and leveraged ETFs, advising investors to choose wisely.

Read more: Why stock pickers still won’t ever outperform market index long-term