We are not saying you should never invest in mutual funds. There are good reasons to hold mutual funds in certain accounts, and they are responsible for helping millions of investors reach their goals.

There are some solid managers out there, but the latest (mid-2017) Standard and Poor’s annual SPIVA report (S&P Indices Versus Active) paints a legitimately grim picture for Wall Street’s active managers’ ability to beat their benchmarks.

The report analyzes actively managed mutual fund managers’ performance in the following categories:

~S&P 600 Small Cap Index (small-cap U.S. stocks)
~S&P 400 Mid-Cap Index (mid-cap U.S stocks)
~S&P 500 Large Cap Index (large-cap U.S. stocks)

While the 1-, 3-, 5- and 10-year periods are nothing to write home about, the long term holding period of fifteen years is the most eye-popping. Why? Because mutual fund peddlers will always tell you that you only invest in funds for the long term. Why? Because it gives your investment the appropriate time to generate positive returns, capturing more “bull cycles,” AND it give the investor time to recoup some of the hefty commissions paid on the front end.

Well, over this long term fifteen year period, from July 1 2002 through June 30 2017, only 6.82% of large-cap managers, 5.60% of mid-cap managers, and 5.57% of small-cap managers outperformed their respective index.

Roughly speaking, then, about 94% of active managers did not beat their passive, unmanaged indices.

WealthKeep is a strong proponents of passive versus active management, and we cannot add more emphasis than what SPIVA has provided us.


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