Can you believe that in 2022, 75% of Large Cap Funds underperformed the index? Furthermore, when we compare 3 and 5-year returns, only 31% and 25% of active funds outperformed the index, respectively.
Hard to believe right? But this is the reality. That’s the reason two quotes always make me follow index funds blindly.
Daniel Kahneman in his book ‘Thinking, Fast and Slow” mentioned that “Mutual funds are run by highly experienced and hardworking professionals who buy and sell stocks to achieve the best possible results for their clients. Nevertheless, the evidence from more than fifty years of research is conclusive: for a large majority of fund managers, the selection of stocks is more like rolling dice than playing poker. More importantly, the year-to-year correlation between the outcomes of mutual funds is very small, barely higher than zero. The successful funds in any given year are mostly lucky; they have a good roll of dice. There is general agreement…