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Part: 5 Building Wealth: Choosing the Ri... > If You Choose an Actively Managed Mu...

Chapter 30. If You Choose an Actively Managed Mutual Fund

Let's temporarily forget the fact that for the 10-year period ending mid-2000, only about one in four actively managed U.S. stock funds was able to outperform the market index as measured by the S&P 500. Let's forget that you could have owned an index fund that holds the S&P 500 stocks and has an operating cost of around 0.20 percent versus the average operating cost of the typical equity mutual fund of about 1.42 percent. After all, many of us think we are above average, and we can pick a good actively managed mutual fund (myself included).

Of course, there are periods when stock pickers shine. One such period was early 2000 to early 2001, when most actively managed funds outperformed the S&P 500 Index on a trailing 12-month basis. Other such periods over the past can be identified.


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