Virtually all mutual funds have struggled lately but some have struggled more than others. According to Standard & Poor’s:
* Even though the S&P 500 Index lost 19 percent in the five calendar years, through 2008, it still beat 72 percent of actively-managed mutual funds investing in large-cap stocks.
* The S&P Small-Cap 600 Index outperformed 85 percent of small-cap funds in that time period. This occurred even though many investors believe active managers do better in the "inefficient" market for small-caps.
* The S&P/IFC Emerging Markets Index beat 90 percent of actively managed emerging markets stock funds during those five years.
There have been some active managers who beat their benchmarks and some times when most active managers excelled. Nevertheless, it is difficult to predict those managers and those times. Most investors will do well to build their portfolios around low-cost index funds and allocate modest amounts to active managers, in search of higher returns.
