There has been an increasing clamour to move from actively managed funds to passive schemes. Media reports of actively managed funds underperforming their benchmarks have abounded. Moreover, with passive funds being popular overseas and a growing number of Index/ETF NFOs being rolled out by mutual funds, passive schemes are garnering more interest.
Index funds are promoted as being low cost, but that alone cannot be the driving factor in choosing them. The index fund category is doing well over the last couple of years, driven by overperformance in 10-12 stocks of the index. The broader markets, mid and small-caps have lagged behind. However, investors should not forget that this is not the case always. Mid-cap schemes beat index funds from 2014-2017.