Mutual Funds That Consistently Beat the Market? Not One of 2,132. (Published 2022) (2024)

It’s very hard to beat the stock or bond markets with any regularity.

Each year, some investors manage to do it, of course, but can they do it consistently? A new study of actively managed mutual funds by S&P Dow Jones Indices asked that question and came up with a startling result.

It found that not a single mutual fund — not one — managed to beat its benchmark in either the U.S. stock or bond markets regularly and convincingly over the last five years. These results are even worse than those of 2014 and 2015, when I last examined this subject closely.

“If you want to be adventurous and pick stocks or actively managed funds, go ahead, of course,” Tim Edwards, global head of index investment strategy at S&P Dow Jones Indices, said in an interview. “But understand the risks you are taking.”

These findings support practical advice that has been the academic consensus for decades. Forget about trying to beat the odds and outsmarting everybody else. Instead, use low-cost stock and bond index funds that mirror the overall market, and keep them for decades. Don’t bother with fads or fancy market timing.

While it’s possible to beat index funds, it’s not easy to do over the long run, and as Paul Samuelson, the first American to win the Nobel in economics said in the 1970s, it isn’t worthwhile for most of us to try.

Yet especially in a year like this — when both the stock and bond markets have had horrendous losses — it’s tempting to seek a better way. Why stick with index funds, which merely match the market, and ensure that you have had what any sane person would consider terrible results?