Some mutual funds try to track their benchmarks. Others try to beat their benchmarks.
Unfortunately, most mutual funds have historically lagged their benchmarks.
According to Goldman Sachs’ David Kostin, 2014 has been a particularly challenging year for large-cap equity mutual fund managers.
“Market swings and shifting volatility regimes have compounded the performance difficulty for fund managers this year,” Kostin wrote on Friday. “Only 12% of large-cap core mutual funds have outperformed the S&P 500 YTD, the lowest share since 1997. Following the 7% S&P 500 sell-off in October, the index rallied sharply by 11% during the course of two months to new record highs, before the past week’s turbulence.”
This only adds to the case for choosing passively managed index funds over actively managed funds.