Do active funds really outperform passives in sideways or falling markets?

80-20 Investor members will know that I have no preference for active or passive funds nor do I champion using one over the other. Just as a reminder actively managed funds are those run by a fund manager whose job it is to pick investments and use his or her skill to outperform their peers. Passive funds on the other hand tend to simply track market indices and are run by automated computer programmes. The latter tend to be considerably cheaper as a result.

80-20 Investor incorporates both types of funds and indeed my own £50,000 portfolio has contained both passive and active funds at various points as a result. Yet the debate rages on between the two camps over which is best. All the research on the subject always seems to start with the same flawed assumption, which is that you have to buy and hold an investment in perpetuity.