Every six months Standard & Poor’s releases its SPIVA Scorecard, a report on the percentage of active funds that underperformed selected S&P benchmarks. Almost every report says the same thing: If you had randomly selected an actively managed mutual fund, you probably would have underperformed a closely matched benchmark. Is this fact by itself a persuasive argument for passive investing? Not really.

We already know that before costs the typical actively managed dollar and the typical passively managed dollar earn the same return, but that after costs the typical actively managed dollar underperforms on account of higher costs. This is a mathematical truism commonly known as the arithmetic of active management or the cost matters hypothesis. The SPIVA is simply a noisy repeat measurement of this mathematical fact.

I say noisy because it is possible for most active managers to beat their SPIVA-assigned benchmarks. The typical manager tends to underweight larger-cap stocks relative to their SPIVA-assigned benchmarks. All it takes is a collapse in larger-cap stocks for managers as a whole to look brilliant. This happened in 2000, when 63% of large-cap stock funds beat the S&P 500 as the dot-com bubble burst. Many investors mistook this to mean that active managers are better to own during bear markets.

Even the arithmetic of active investing by itself can’t tell you whether indexing is a good idea for a specific investor or even most investors. You can imagine a world in which a handful of large entities like central banks predictably underperform the rest of the market in pursuit of non-economic goals. This would allow many smaller investors to outperform. You can also imagine a world in which a handful of elite investors predictably outperform the rest of the market because of superior information. This would require many smaller investors to underperform. The decision to go active or passive should depend on a sober assessment of one’s “edges”, or inherent advantages over other market participants, and the composition of other players in the market.

Once these factors are taken into account, active investing may be preferable for some investors and not others. For what it’s worth, I happen to believe that index funds are the best options for most investors, most of the time—just not for all investors, all of the time.