Active vs Passive Investing

Active investing tries to beat a benchmark by selecting securities; passive investing tries to match one as cheaply as possible. The arithmetic is stacked: before costs, active investors collectively hold the market and therefore earn the market return, so after costs they must trail it on average. Long-horizon scorecards bear this out, with 80–90% of active funds lagging their benchmark over 15 years. The debate is really about whether you can identify the exceptions in advance.