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 price return over the trailing ten years, best first, computed from monthly closes.

1. 1

   ARKK · ARK Innovation ETF

   ARK Innovation, actively managed

   +399%

   Ten-year price 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 $49,928, a figure that hides an enormous round trip and would look completely different measured from a different starting year.

   $49,928 from $10,000 over ten years
2. 2

   VOO · Vanguard S&P 500 ETF

   Vanguard S&P 500, passive

   +295%

   Ten-year price return

   Vanguard S&P 500, passive. Ten thousand dollars became roughly $39,525 over the decade, with no manager, no thesis and a fee close to zero.

   $39,525 from $10,000 over ten years
3. 3

   SPY · SPDR S&P 500 ETF

   SPDR S&P 500 ETF, the passive benchmark

   +295%

   Ten-year price return

   SPDR S&P 500 ETF, the passive benchmark. Ten thousand dollars became roughly $39,453 over the decade, with no manager, no thesis and a fee close to zero.

   $39,453 from $10,000 over ten years
4. 4

   BRK.B · Berkshire Hathaway

   Berkshire Hathaway, actively allocated

   +293%

   Ten-year price return

   Not a fund but a company allocating capital actively, which makes it the fairest available comparison to a low-cost index over long periods. Ten thousand dollars became about $39,329.

   $39,329 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.