... Many investors find passively managed index mutual funds or ETFs to be good options for stock investing. However, they may also find that actively managed funds can offer significant advantages over passive funds for bond investing.
Stock markets offer investors opportunities to buy or sell shares of a relatively small number of companies and the process of valuing, buying, and selling stocks is efficient. Bond markets, however, are much larger, more complex, and far less efficient. That’s not necessarily a bad thing, but it does suggest that differing investment strategies may be needed in differing markets.
Unlike stock markets where even the most skilled and experienced managers may struggle to outperform popular market indexes such as the S&P 500 over time, the very size, complexity, and inefficiency of the bond markets has historically created opportunities for skilled active managers to outperform popular indexes.
In fact, the majority of active bond managers have outperformed their benchmark indexes over time, sometimes significantly. Meanwhile, passive bond investing strategies have sometimes struggled to deliver performance that matches their benchmark indexes because broad-based fixed income indexes are more difficult to replicate than stock indexes are. Remember, though, that past performance is no guarantee of future results. ...