Ditch the Five Active Funds That Lagged for a Decade and Own What They Were Chasing With These 3 ETFs
You held onto actively managed funds for years out of loyalty, then habit, while they quietly fell behind the very benchmarks their managers promised to beat. There is a simpler path, and it costs almost nothing to own.
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You’re 68, and you still own five actively managed funds you bought years ago. Each one has trailed its benchmark for about a decade. You kept them out of loyalty, then out of habit. Those managers spent that decade trying to beat a market index. You can own that index directly. The job can be handled by three ETFs: iShares Core S&P Total U.S. Stock Market ETF (NYSEARCA:ITOT), iShares Core MSCI EAFE ETF (CBOE:IEFA), and Vanguard Short-Term Bond ETF (NYSEARCA:BSV).
Check Each Fund Against the Right Benchmark First
Start with one accuracy check. If you measure a fund against the wrong index, it can look worse or better than it really did. A small-cap fund measured against a large-cap index tells you nothing useful. Each fund’s annual or semiannual report names its own benchmark. Line up each fund against that index over the same period. Once the comparison is fair, the decision gets clearer.
Make the Switch Without a Surprise Tax Bill
Where the funds sit matters. Inside an IRA, selling one fund to buy another doesn’t trigger tax at the time of the trade. In Publication 554, the IRS says, “Generally, amounts in your IRA, including earnings and gains, aren’t taxed until distributed.”
A taxable account works differently. Selling there can realize gains. Check your cost basis on each fund first, and think about spreading the sales across more than one tax year.
ITOT Puts the Entire U.S. Stock Market in One Holding
ITOT takes the place of your U.S. stock funds. It tracks the S&P Total Market Index, which covers U.S. common stocks listed on major exchanges across large, mid, and small companies. Whatever corner of the U.S. market your managers were working, ITOT already owns it.
The fund launched in January 2004 and charges a 0.03% expense ratio. Over the past 10 years, it returned about 305.81% adjusted for distributions, and it was up 13.7% year to date through late October. It pays quarterly. The most recent payment was about $0.45 per share in September 2026.
IEFA Covers Developed Markets Outside the U.S.
IEFA replaces your international fund. It tracks the MSCI EAFE IMI Index, which holds large, mid, and small companies in developed markets outside the U.S. and Canada. Japan is the biggest country weight at 24.37%, followed by the United Kingdom at 14.67% and France at 9.22%. Top holdings include ASML at 2.12%, along with AstraZeneca and Novartis, so no single company dominates.
Net assets stood at roughly $190 billion as of July 31, 2026. It charges 0.07% and carries a dividend yield of about 2.74% on its most recent fact sheet. Its 10-year return was about 142.76%, and it gained 12.03% over the past year.
BSV Swaps Your Bond Fund for Short-Term Investment-Grade Debt
BSV takes over the bond role. The fund follows an index of U.S. government bonds, investment-grade corporate bonds, and investment-grade international dollar-denominated bonds with maturities of 1 to 5 years. Because of its short maturities, the fund is less sensitive to interest rates than longer-term bond funds. That matters with the 10-year Treasury yield at 5.00% as of October 26, 2026.
For a retiree, the monthly income stands out. BSV paid about $3.15 per share over the past 12 months. Its latest payment was $0.267965 in October 2026. Investors should understand one structural feature of bond funds. A bond fund holds bonds, but the fund itself never matures. You won’t get a fixed principal amount back on a set date, and its price can fall when rates rise.
What You Give Up by Owning the Benchmark
Index funds come with limits. Each of these funds can trail its own index slightly by the amount of its costs, and none of them will ever beat the market. You’re trading the hope of outperformance for getting the market’s return. Your current funds didn’t deliver that.
Expect uneven results across the three. Over the past decade, IEFA’s 142.76% return trailed ITOT’s 305.81%, and international stocks can go through long stretches like that. BSV gives up growth for stability. It returned 20.98% over 10 years and 1% over the past year, and it can still lose value.
After a decade of your five funds falling short, these three are worth researching. ITOT, IEFA, and BSV own the markets your managers tried to beat. Going forward, watch for expense ratio changes, how rate moves affect BSV’s price and payouts, and whether international stocks keep trailing U.S. shares.
Contact [email protected] for any questions or corrections.
Ryne Mauck is an investment writer covering exchange-traded funds, retirement planning, and portfolio strategy. Through his work at 24/7 Wall St. and other investment platforms, including Seeking Alpha, he aims to provide clear, research-driven insights that help investors make more informed decisions while maintaining a long-term approach to investing.
Ryne holds a B.Sc. in Finance and an M.A. in Political Science. He is a formerly registered Municipal Advisor Representative and has passed the Series 50, Series 63, and Series 65 exams. His articles are not intended to be, nor should they be interpreted as, financial advice.
