Mutual funds lag behind the stock market
It looks like actively managed stock funds can’t beat the market -- even when the market itself is struggling.
More than four out of five actively managed U.S. stock funds trailed their underlying indexes in 2011, even though the stock market plodded through an uninspiring year, according to new research.
An analysis by Standard & Poor’s Corp. found that 84% of funds underperformed last year. That’s even worse than their dismal showings in the recent past. Over the last three years, 57% of funds trailed their indexes. Over the last five years, 62% lagged.
The stock market was relatively flat in 2011, with the Standard & Poor’s 500 index essentially finishing the year where it started it.
Global stock funds were similarly unimpressive, according to S&P, with 69% of funds underperforming over the last three years and 55% trailing over the last five years.
Actively managed funds have lagged during the two brutal bear markets of the last decade when fund managers theoretically had an advantage, according to S&P.
“Bear markets should favor active managers,†S&P said in a statement. “Instead of being 100% invested in a market that is turning south, active managers have the opportunity to move to cash, or seek more defensive positions. Unfortunately, that opportunity does not translate to reality.â€
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