Irrelevant Investor: This Is 'The One Thing We Can All Agree On'

According to The Irrelevant Investor, for investors who pay a higher fee for a mutual fund versus an index fund, the mutual fund should sufficiently differentiate itself to achieve a superior return.

However, any deviation from the index fund is not necessarily predictive of higher returns. The blog quoted Morningstar's Russ Kinnel, who said:

"The quintile with the highest active share among U.S. equity funds had a meager 29 percent success ratio, followed by 27 percent for the second quintile, 32 percent for the middle quintile, 40 percent for the fourth quintile, and 43 percent for the least-active quintile."

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Kinnel added that for the sake of comparison, the cheapest quntile of U.S. equity funds boasts a success ratio of 64 percent compared to 16 percent for the most expensive quintile. Meanwhile, the high active-share quintile's 29 percent success ratio is similar to a 28 percent success ratio seen in the fourth (the second priciest) quintile.

Essentially, what the blog argues is that active managers could add value to a portfolio for investors but the problem is figuring out which ones is "extremely difficult." In addition, sticking with a fund manager that is able to generate a superior return at a time of underperformance might be more difficult than actually finding one in the first place.