Multiple Active Funds Calculator

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Disclosures:

  1. The expected return of an active fund in any given year is assumed to fall below the benchmark return by the amount of its expense ratio combined with one year's worth of the front-end load.
  2. Based on a study conducted by Index Fund Advisors of 237 active funds over a 20 year period, the assumed standard deviation of a fund’s alpha (difference between the fund return and the benchmark) is 6%. Choosing a lower value than 6% would lower the probability of a fund beating the benchmark.
  3. Alphas are assumed to follow a normal distribution, and each fund's alpha is assumed to be independent of all other alphas.