When Passive Beats Active

If you get what you pay for in cars, something approaching the opposite is true in fund investing. This year's case in point is the contrast between returns of plain-vanilla exchange-traded funds (ETF) versus pricier stock-picking mutual funds. The investor who took this column's advice in January of opting for the simplest passive ETFs instead of the stockpicker is ahead of most fund managers for 2014, despite paying a fraction of the cost. If there's good news for stockpickers, it's that uniformity isn't universal. Biotechnology, for instance, is one area where dispersion is unusually high.