Vanguard Report: Active Fund Managers Strike Out (Again)

Vanguard Report: Active Fund Managers Strike Out (Again)

In a recent two-part series of posts, “Investment Hindsight is 20/20,” we covered Dimensional Fund Advisors research that explored the hard evidence on how squishy past performance has been as a predictor of future success for individual mutual funds. Dimensional demonstrated how that strategy was out, with three strikes:
  1. Each fund most operate within a largely efficient market where past performance is quickly priced into future expectations.
  2. Funds’ odds for survival are low in a highly competitive environment.
  3. The costs involved in achieving outperformance are often insurmountable.

Shortly after we posted this series, Vanguard Funds published another report, “The Bumpy Road to Outperformance,” offering additional, similar evidence. Vanguard analyzed the performance of all actively managed U.S. stock funds available to investors in 1998 – 1,540 funds total – following their track record for the next 15 years through year-end 2012. They concluded:

  1. Survivorship – Nearly half of the funds (700 of them) didn’t even survive the 15-year period.
  2. Performance – Of the survivors, only about 18 percent of them out-performed their appropriate benchmark.
  3. Reliability – Among those 18 percent who managed to survive and outperform their benchmarks from 1998–2012, most of them experienced at least three years in a row of underperformance along the way. The bumpy ride significantly tested investors’ resolve to stay the course if they wanted to actually achieve long-term growth.

Vanguard reported, “Only 6% of the initial 1,540 funds survived, outperformed, and avoided three consecutive years of underperformance.”

Another strike-out!

SAGE Serendipity: As enigmatic as our stock markets can be, some things are even more perplexing. Did you ever wonder why “pound” is abbreviated as “lb.”? Here’s the answer. (Hint: If you’re fluent in Latin, it all makes sense.)

Sheri Iannetta Cupo, CFP®, is Founding Principal of SAGE Advisory Group, based in Morristown, NJ, an independent, Fee-Only Registered Investment Advisory firm, specializing in providing busy professionals and their families with holistic financial life planning and investment management services. You can find more here: where this post originally appeared. You can also connect with Sheri on Twitter, Google+ and LinkedIn.


  1. 825171 149144Pretty part of content. I just stumbled upon your weblog and in accession capital to assert that I get really loved account your weblog posts. Any way Ill be subscribing on your feeds or even I success you access constantly quick. 915164

  2. 170012 970755Aw, this was a quite good post. In thought I want to put in writing like this moreover ?taking time and actual effort to make a extremely great post?however what can I say?I procrastinate alot and undoubtedly not appear to get one thing done. 995239

  3. 744540 484058I discovered your weblog web site on google and examine quite a few of your early posts. Continue to preserve up the superb operate. I basically extra up your RSS feed to my MSN News Reader. In search of forward to reading a lot more from you later on! 255456

  4. 138478 339138Aw, this was a actually nice post. In thought I would like to spot in writing in this way moreover – taking time and actual effort to create a extremely good article but what / points I say I procrastinate alot and also no indicates apparently get something done. 277375


Please enter your comment!
Please enter your name here