How many mutual funds beat the S&P 500 on a percentage basis after operational fees?

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March 2016
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This is a great question because essentially what you are asking is “how many managers have enough skill to beat the market after all fees and expenses?” Before we give you an answer it is essential that we are comparing apples to apples. So if we are asking how many managers outperform the S&P 500, which is a US large cap index, then we need to look at the performance of active managers who are trying to pick the winners in the US large cap asset class. We don’t want to look at small cap managers or foreign stock managers or bond managers because we would then be comparing apples to oranges. 

All right, enough with the fruit. Based on the Standard & Poor’s Index Versus Active (SPIVA) scorecard as of June 30, 2015, 65.34% of large cap managers underperformed the S&P 500 for the 1-year period. Over the last 5-year period, 80.8% underperformed the S&P 500. Over the last 10-year period, 79.59% of active managers underperformed. These types of figures are very similar in other asset classes like small cap stocks and foreign stocks. 

Rest assured, it is very, very difficult to do over long time horizons, which is why we tell our investors to buy and hold a globally diversified portfolio of index funds versus trying to pick the next best winner. 

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