NEW YORK (Fabian Capital Management) -- The truth about exchange-traded fund outperformance is that alpha is hard to come by -- and that is a good thing for most investors.
A recent post by Paul Britt of ETF.com talked about how only 15 of 425 U.S. equity strategies have beaten their benchmarks over the last 52-weeks. The article points out that the universe of ETFs they compared were judged according to a similar benchmark and only funds with a statistically significant level of alpha were culled from the list.
However, that statistic may be somewhat misleading, as the majority of ETFs are designed to track a passive index and are therefore going to provide returns (less fees) that are measurably similar to their established basket of stocks. You should actually take comfort in the fact that ETFs are not significantly straying either positively or negatively from their constituent index because that means they are functioning correctly.
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