Long Term Performance Comparison

– Evaluate the impact of fees and expenses associated with actively managed funds versus the typically lower costs of index investing. – Factor in expense ratios, management fees, transaction costs, and other expenses that can erode returns over time.

1. Cost Efficiency

– Examine risk-adjusted returns to determine if actively managed funds offer superior performance after considering the level of risk taken. – Assess metrics such as Sharpe ratio or alpha to gauge risk-adjusted performance between the two strategies.

2. Risk-adjusted Returns

– Explore the implications of the efficient market hypothesis on the performance of actively managed funds. – Discuss the challenges faced by active managers in consistently outperforming the market over extended periods.

3. Market Efficiency

– Consider how investor behavior influences the long-term performance of both strategies. – Discuss common pitfalls such as chasing past performance or frequent trading that may impact returns.

4. Investor Behavior