The False Dichotomy

Why the Active vs. Passive Fund Debate Misses the Point

In the ongoing debates about the virtues of active versus passive investment strategies, a fundamental problem undermines meaningful discussion: there is no universally accepted definition of what constitutes a “passive” strategy. This definitional confusion creates artificial distinctions that obscure more important considerations for investors.

The Classification Paradox

Consider how major fund analysts categorize investments. Morningstar classifies all index funds as passive, while funds from companies like Dimensional Fund Advisors and Avantis are labeled as active. Yet, when we examine how these funds actually operate, this distinction becomes largely meaningless—a classic case of “a distinction without a difference.”

You can read the rest of my Morningstar article here