⚖️ Comparison · Updated for 2026

Active funds vs Passive / index funds

Side-by-side comparison, when-to-use-each guide, and instant conversion. Reviewed for 2026.

Quick answer: The evidence is overwhelming: 80-90% of active fund managers underperform their benchmark index over 10+ years, after fees. The average active fund fee is 0.75-1.5%; index funds charge 0.07-0.25%. The fee difference compounds dramatically over decades. Warren Buffett's famous bet (2008-2017): low-cost S&P 500 index beat a fund-of-hedge-funds by 125.8% vs 36.3%.
Decision guide — when to use which
Use Active funds when…

Very specific sector bets, fund managers with verifiable long-term alpha, thematic investing.

Use Passive / index funds when…

Long-term wealth building, retirement savings, most of most people's portfolio.

📊 Side-by-side comparison
Aspect Active funds Passive / index funds
Fees 0.75-1.5% p/a 0.07-0.25% p/a
Long-term outperformance ~15-20% of active funds beat index over 20yr N/A (is the benchmark)
Tax efficiency Lower (more trading) Higher (less turnover)
Transparency Variable Full (you know exactly what you own)

Frequently asked

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Are there any active funds worth investing in?

Some exist — Terry Smith's Fundsmith Equity has outperformed its benchmark since its 2010 launch, though it has lagged in recent years. But selecting the future winners in advance is extremely difficult: most outperforming funds in decade 1 underperform in decade 2. For most investors: a global index fund plus a small active satellite position is a reasonable compromise.

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Which index fund should I buy?

Vanguard FTSE Global All Cap (covers UK, US, Europe, Emerging Markets) or Vanguard LifeStrategy 80% Equity (global with bond allocation for risk management). These are the most recommended starting points by fee-conscious UK investors. Available via Vanguard Investor, Hargreaves Lansdown, or AJ Bell.

Reviewed for 2026. This comparison is general guidance based on publicly available information. Prices, rates, rules and specifications change, so check current details with the provider or an official source before making a decision. Built by a UK-based qualified primary teacher and FA Level 2 coach as part of 247QuickTools' free utility-tools project. We don't sell SEO links or accept paid placements in this content.

Frequently asked questions

Are there any active funds worth investing in?

Some exist — Terry Smith's Fundsmith Equity has outperformed its benchmark since its 2010 launch, though it has lagged in recent years. But selecting the future winners in advance is extremely difficult: most outperforming funds in decade 1 underperform in decade 2. For most investors: a global index fund plus a small active satellite position is a reasonable compromise.

Which index fund should I buy?

Vanguard FTSE Global All Cap (covers UK, US, Europe, Emerging Markets) or Vanguard LifeStrategy 80% Equity (global with bond allocation for risk management). These are the most recommended starting points by fee-conscious UK investors. Available via Vanguard Investor, Hargreaves Lansdown, or AJ Bell.