It's not new news that the majority of Mutual Fund Managers fail to turn in performance equal to the S&P 500. If you think about it, this is quite a feat. Mutual Fund Managers cannot match the performance of a group of stocks selected based on a simple minded formula. The S&P 500 represents the 500 companies that have the highest number when you multiply the number of shares outstanding by the stock's price. S&P gives no preference based on business factors, such as; growth potential, dividend return, historic performance etc.
I was interested to see the 2008 result. If ever there were a year when the professionals could trounce, (not just match), the results of the S&P 08 was it. Why was I so sure the managed funds would finally win in 2008 after 43 consecutive losses? Because by definition the S&P is always fully vested in the stock market and no mutual fund is 100% in equities. Hence, as the market dropped, the mutual funds had the cushion of all that un-invested cash sitting in their accounts thus giving them protection from the falling market and even earning a little interest to boot. On the other hand, the S&P was locked in riding the downward wave.
Yet, Fund Managers did it again: 68.6% of the large cap funds underperformed the S&P 500. If that's not bad enough, 77.8% of mid cap funds underperformed the S&P 600 Mid Cap.
P.S. In 2008, Mutual Funds charged investors over $200 Billion to hold and manage our money.
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