ETFs are outperforming stock picking | S&P Dow Jones Indices and Jessica Amir

Moomoo Market Strategist Jessica Amir chatted to S&P Dow Jones Indices, Head of Index Investment Strategy Anu Ganti, who is based in the US. They dissected the latest investing and ETFs trends covering that ETFs have outperformed stock picking and active investment managers returns over the last 20 years.

Here are some highlights of the interview.

• The ETF trends that stood out in 2023. Some of the best returns were in sectors that typically do well when interest rates are cut.

• The dispersion of returns last year, was a surprise to S&P Dow Jones Indices, as it showed it's harder to pick stocks and outperform the share market.

• In 2019 25% of the US market was held by index funds (ETFs), as highlighted by Managing Director of S&P Dow Jones indices, Craig Lazzara. But over the last five years the ownership of the S&P500 by ETFs has grown by about 10%.

• What is driving the ETF growth; with investors opting for ETFs to save on fees, with investors saving about $28 billion in 2022 in fees. To why investors are using ETFs, as they are finding it increasingly harder to outperform the market. And this trend has been the case since the 70s.

• Most equity markets are 'positively skewed', meaning outperformance is usually driven by a few wining stocks.

• Stock picking has underperformed buying and holding ETFs, over the last 20 years. In fact, 77% of Australian equity active managed funds underperformed the ASX200, marking the second worst performance in history. Also, when the Fed has cut interest rates, ETFs tracking the S&P500 or ASX outperformed active investment managers who pick stocks.

Click the image to watch the interview: