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Chapter 8. Mutual Funds: Performance > Mutual Fund Investors Underperform the M...

Mutual Fund Investors Underperform the Market

While mutual fund managers may be good at picking stocks, do mutual fund investors enjoy those high returns? That is, the high investment ability of fund managers is only important if the mutual fund investors realize the good returns.

To examine the performance of mutual fund investors, it is best to look at the returns mutual funds generate through changes in the share value (NAV) and income and capital gains distributions. Between 1982 and 1991, the average annual return for equity mutual funds was 15.69%, compared to the 17.52% for the S&P 500 Index.[5] From the point of view of the mutual fund investors, funds underperformed the market by –1.8% per year. Tests using other time periods found a similar underperformance.


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