Are Actively Managed Funds Worth the Gamble?

The rise of passive investing – index funds and such – has triggered a series of Wall Street Journal articles. The rise seems unstoppable:

[F]or the last 10 years… between 71% and 93% of U.S. stock mutual funds either closed or failed to beat their closest index funds.

The Journal gives two prominent mutual fund leaders the thankless job of defending stock pickers. 

Capital Group's Tim Armour cites in-house research indicating that "active funds with low expenses and a substantial amount of the manager’s own money invested in the funds on average beat their benchmarks 89% of the time over 10-year rolling periods." 

Michael Roberge, co-CEO of MFS, refers to a study showing that bold fund managers willing and able to hold their favorite stocks for long periods do better than average. 

Both Armour and Roberge also hint that active managers may be able to limit losses by timing the market. And both point out that stock returns in the foreseeable future are expected to be below par. If so, investors who bank on index funds to provide the same growth they have enjoyed since the Great Recession will fall short of their goals. 

So why not gamble and buy active?