How can investors reasonably justify buy actively managed funds instead of index funds?
A)higher management fees usually suggests better performance
B)the fund consistently outperformed the market,net of fees,and is expected to continue to do so
C)the fund outperformed the S&P 500 by 4% last year
D)the portfolio manager is new and considered a star analyst

Question

Quizplus · Accepted Answer

The only justifiable reason to invest in an actively managed fund over an index fund is if the fund consistently outperforms the market, net of fees, and is expected to continue doing so. Higher management fees do not necessarily suggest better performance, and one year of outperformance (C) may not be indicative of future results. While a star analyst (D) may be promising, it is not a guarantee of success in managing a portfolio.

How Can Investors Reasonably Justify Buy Actively Managed Funds Instead