Why Active Investors Must Trail the Market — Proven by Math in 1991 #Shorts

Back on the desks we called this the 1991 proof: Sharpe's Arithmetic of Active Management, a simple accounting rule showing that active vs passive investing must average out to the exact same return before fees. The active management fee gap is what decides the rest — subtract the expense ratio (the yearly fee a fund charges) and the passive investment advantage kicks in automatically, no skill or forecasting involved. Takeaway: pull up any active fund's factsheet, compare its net return to a broad index fund's expense ratio, and the arithmetic already tells you who's winning. sharpe arithmetic active management · active fund fees impact · stock picking arithmetic law #investing #indexfunds #stockmarket #personalfinance #activemanagement #passiveinvesting #financeexplained

Added 28 Jul 2026