Review: Most investors didn’t come close to beating the S&P 500

Shockingly, the average investor lost to the market. It happens most years, yet the financial media acts like it’s Truman defeating Dewey every time.

Looking at the data from Openfolio, a platform for individual investors, their average investor was up about 5% on the year. That’s around 7% worse than the S&P 500 Index. On a million dollar portfolio, that’s a difference of making $50,000 versus $70,000 for the year. And the people with $70,000 would have had fewer headaches about what the market was doing.

And that’s just for individual investors. The professionals came up short, too, in all four areas the article examines (US Stock Funds, US Sector Funds, Target Date Funds, and International Stock Funds). I’ve said it before and I’ll say it again: active management just adds noise and expense to your investments.

All of this just goes to show that trying to beat the market is a fool’s errand. Active management is, over the long term, a negative sum game. The only way to win is to stay out of the game.

For more on how to make the markets your ally, read Making the Markets Work for You

 

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