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Can stock pickers fight the rise of passive investors?

Active fund managers must prove their strategies are worth the cost

“Don’t look for the needle in the haystack. Just buy the haystack,” wrote John Bogle, the late founder of investment firm Vanguard. His quip is now conventional wisdom. America’s passively managed mutual funds and exchange traded funds — which mimic overall market indices — ended last year with more assets than active ones, following years of strong inflows.

Though many still tout their stock and bond picking credentials, active fund managers only rarely generate alpha (or market-beating returns). In the long term the index tends to win, substantiating Bogle’s advice. So, why risk money hoping to unearth the next Google or Amazon when it is both safer and more lucrative to be invested in everything?

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