Question of the Day: Over a recent 15 year period, what percent of professionals investing in large companies "beat the market?"

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Nov 12, 2018
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Investing, Behavioral Finance, Index Funds, Mutual Funds

Answer: Only 8% (All Large Cap Funds vs. the benchmark S&P 500)

Questions:

  • Why do you think professionals struggle to "beat the market?"
  • Why do you think investors continue to invest their money with professionals despite their record of not being able to "beat the market?"
  • Your friend says "you are better off investing with professionals instead of buying a simple index fund (e.g., S&P 500) that matches the market return." Do you agree or disagree based on the data above? 

Click here for the ready-to-go slides for this Question of the Day that you can use in your classroom.

Behind the numbers (SPIVA mid-year 2018 report):

Similarly, over the 15-year investment horizon, 92.43% of large-cap managers, 95.13% of mid-cap managers, and 97.70% of small-cap managers failed to outperform on a relative basis.

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Rather than tell students about the challenges of beating the market, let them experience it by playing STAX, the newest game to teach investing. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program 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 non-profit, Next Gen Personal Finance.