Why Beating the Market is Harder Than it Looks for Active Fund Managers

Recent report claims majority of active funds beat benchmarks, but true picture is less rosy.
Sharpe showed active managers must lag indexes on average due to arithmetic.
For every manager beating market, another must lag - zero-sum before costs.
Believing you can beat market is tempting, but risks retirement security.
Split assets into Permanent index portfolio and Speculative active portfolio.

marketwatch.com

Relevant topic timeline:

8/27/2023

Do your portfolio results differ from what the investment fund reports? This could be why.

Investors often underperform mutual funds or exchange-traded funds due to poor timing decisions, such as buying and selling based on reported total returns, resulting in a lag of around 1.7 percentage points compared to the fund's reported results.

9/27/2023

Study Shows Most Money Managers Struggle to Beat the Market

The latest SPIVA report from S&P Dow Jones Indices reveals that even professional money managers struggle to beat the market, with 60% of active large-cap U.S. equity managers underperforming the S&P 500 in the first six months of the year. The report also highlights the long-term challenges faced by active managers and emphasizes the importance of sticking with a plan and considering costs when making investment decisions.