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QoD: What percent of investment professionals beat the MKT in the last 20 years?

The answer could change the way you think about investing.

Answer: 94% of investment professionals underperformed (see below), so only 6% “beat the market”

Note: The S&P 500 (the comparative index) is made up of the largest publicly traded US companies, ranked by their market capitalization. This NGPF activity, What is the S&P 500?, using the FinViz visualization helps students understand this index.

Ask:

Why do you think investment professionals struggle to “beat the market?” Why do you think investors keep investing their money with professionals, despite not being able to “beat the market” in the long run? Your friend says “better invest with professionals rather than buy a simple index fund (eg S&P 500) that only matches the market return.” Do you agree or disagree?

Click here for ready-made slides for this Question of the Day that you can use with your students.

Behind the numbers (SPIVA report, 2021):

A UNIQUE SCORECARD FOR THE ACTIVE VERSUS PASSIVE DEBATE There is nothing new about the index versus the active debate. It has been a controversial topic for decades and there are a few strong believers on both sides, with the vast majority of market participants falling somewhere in between. Since its first publication in 2002, the SPIVA Scorecard has served as the de facto keeper of the active versus passive debate. When the headlines have diverged from their beliefs, we’ve heard passionate arguments from both sides.

Teach students about index funds with the most popular game in the NGPF Arcade, STAX.

Get your class predictions for the NGPF “Guess the CPI Contest” before this Wednesday (May 11) at 8:30 a.m. ET. Prices available!

About the author

Tim Ranzetta

Tim’s savings habits started at 7 a.m. when a neighbor with a broken hip gave him a dog walking job. Her recovery, which lasted nearly a year, led to Tim getting to know the bank clerks quite well (and building a savings account balance of over $300!). His recent entrepreneurial adventures include driving a chipper, analyzing compensation packages for Fortune 500 companies, and helping families make better college funding decisions. After volunteering in 2010 to establish a personal finance program and teach at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him. to start a new nonprofit, Next Gen Personal Finance. †


This post QoD: What percent of investment professionals beat the MKT in the last 20 years? was original published at “https://www.ngpf.org/blog/question-of-the-day/question-of-the-day-over-a-recent-20-year-period-what-percent-of-pros-investing-in-large-companies-beat-the-market/”

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