QOTD: Milking the Cash Cow

Investors have pulled money from actively managed U.S. equity funds for nine straight years. They withdrew $98 billion last year while putting $167 billion into passively managed U.S. stock mutual funds and ETFs. The trend toward passive management is unlikely to reverse, Bogle argues. Investment firms that make their money off actively managed funds will milk the cash cow, but their business will wither, he says. Their thinking might go something like this: “‘We’ll shrink, but we’ll take a lot of money out of it on the way down, year after year.’ That’s what a cash cow is,” Bogle says. “In 25 or 30 years, they’ll be gone. That seems like an extreme statement, but I think it’s not without possibility.”