Active Management vs the Index Over Ten Years

The case for index funds is normally made with the SPIVA scorecard, which is rigorous and completely abstract. This is the same argument in a form you can look at: two of the most-discussed active vehicles of the past decade, next to the index they are implicitly measured against and a fund that simply tracks it.

How this is ordered. Ordered by total return over the trailing ten years, best first, computed from monthly closes.

1. 1

   ARKK · ARK Innovation ETF

   ARK Innovation, actively managed

   +352%

   Ten-year return

   An actively managed fund concentrated in high-growth technology, and the clearest illustration on this list of why sequence matters: it produced extraordinary numbers into 2021 and gave much of it back afterwards. Ten thousand dollars over the full decade came to roughly $45,244, a figure that hides an enormous round trip and would look completely different measured from a different starting year.

   $45,244 from $10,000 over ten years
2. 2

   BRK.B · BRK.B

   +213%

   Ten-year return

   undefined. Ten thousand dollars became roughly $31,340 over the decade, with no manager, no thesis and a fee close to zero.

   $31,340 from $10,000 over ten years
3. 3

   VOO · Vanguard S&P 500 ETF

   Vanguard S&P 500, passive

   +208%

   Ten-year return

   Vanguard S&P 500, passive. Ten thousand dollars became roughly $30,835 over the decade, with no manager, no thesis and a fee close to zero.

   $30,835 from $10,000 over ten years
4. 4

   SPX · S&P 500

   S&P 500 index itself

   +192%

   Ten-year return

   S&P 500 index itself. Ten thousand dollars became roughly $29,218 over the decade, with no manager, no thesis and a fee close to zero.

   $29,218 from $10,000 over ten years

Picking two famous active managers with the benefit of hindsight is exactly the selection bias that makes single comparisons unreliable. Read this as an illustration, and read SPIVA for the evidence.