The debate over index funds vs active funds has a fresh set of numbers. A mid-2026 update to S&P's SPIVA scorecard, as reported by a secondary blog, puts 92.6% of U.S. large-cap active funds behind the S&P 500 over 20 years to June 30, 2026, and 78.7% over one year. We could not confirm those figures against S&P's own release, so treat them as provisional. An academic critique also argues the scorecard overstates the problem.
What changed in 2026, and what didn't
What is new is the scorecard data and the argument about how it is built. What is not new is the basic structure and the cost gap, which have been documented for years. Index funds aim to match a benchmark's return minus costs. Active funds try to beat it. The dispute is about how often that second goal is met, and how fairly the measurement captures it.
A paper by Cremers, Fulkerson and Riley argues that SPIVA overstates active underperformance. Its authors reportedly find that 55% of assets underperformed in the relevant year, and that 63% of active U.S. equity funds lagged over 10 years to the end of 2024, against about 90% in SPIVA. Critics dispute this, and the question is open.
How the two fund types are built
An index fund holds what its benchmark holds, so it inherits the index's shape, including any concentration in a few large companies. An active fund relies on a manager's research and selection, and it can tilt toward particular sectors, investment styles or fixed income. Vanguard describes index funds as designed to keep pace with market returns, and active funds as trying to beat them through hand-picked investments.
What each costs, and why the gap compounds
According to the Investment Company Institute, index equity mutual funds averaged an expense ratio of 0.05% in 2025, and index equity ETFs averaged 0.14%. Both are asset-weighted averages. Individual funds vary around them.
Active funds cost more. Fidelity, citing ICI, puts the average active fund fee at 0.64%, but sources disagree on the year. Fidelity attributes the figure to 2024, while a Real Cost Report page attributes it to 2025. We have not yet checked the year against ICI's own PDF, so this article does not state one.
Do not confuse that with the all-equity figure. ICI's Fact Book shows the asset-weighted expense ratio for all equity mutual funds, index funds included, falling from 0.99% in 2000 to 0.40% in 2025. That is a market-wide trend, not an active-fund fee.
Fidelity puts the compounding in dollar terms. On $5,000, it says the average index fund owner pays about $2.50 a year in fees, against about $32 for the average active equity fund owner. A Real Cost Report model uses larger numbers. Assuming $250,000 invested for 30 years at a 7% gross return, it estimates a gap of roughly $297,515 between a 0.03% fund and a 0.64% fund. That is a hypothetical built on its own assumptions, not a measured outcome.
How the scorecard measures active funds
SPIVA, published by S&P Dow Jones Indices, compares active funds with their benchmarks after fees. It excludes index funds from the comparison and is published twice a year. For 2025, secondary reproductions of the U.S. large-cap results report that 79% of active funds underperformed the S&P 500, up from 65% in 2024. Check those figures against S&P's own scorecard page before quoting them.
The method also treats a fund that closes or merges as not having beaten its index. Critics say this treatment, along with how closed funds are handled, affects the headline numbers. The sources do not quantify by how much. Finally, the scorecard describes averages. It does not show how many active funds beat their index over a given investor's holding period.
The methodology dispute, and where active funds do better
The Cremers, Fulkerson and Riley critique goes beyond the counting. Its authors argue that SPIVA counts funds rather than assets, and that it treats closed funds and hypothetical benchmarks differently. Critics dispute the paper's conclusions, and the sources treat the question as unsettled.
Active funds do win in some places. In the Australian SPIVA mid-year 2026 report, a slim majority of active Australian bond funds beat their benchmark in the first half of 2026, while most equity categories lagged. That covers one market and one half-year. In U.S. results, small-cap categories have shown majority outperformance in some periods, including 2024. One commentary attributes that to a large-cap tilt in the benchmark rather than to manager skill.
Taxes, and how to decide
Index funds generally have low turnover, which means fewer capital gains distributions. When a fund sells holdings at a gain, that tax passes through to shareholders, which matters most in a taxable account. How much this saves depends on your tax situation, and the sources did not quantify it. Tax-advantaged accounts reduce the difference.
Several guides suggest a blend: index funds for broad core exposure, and active funds where you want a specific exposure. That is opinion, not evidence of better outcomes. Before buying an active fund, compare its expense ratio and stated mandate with its long-run record against its benchmark. The sources do not show a reliable way to pick future winners, and a reported five-year persistence claim could not be verified, so do not rely on it.