The Truth About Outperforming Index Funds

In this video, I'll go through some additional reasons it's so difficult for actively managed funds to outperform a simple broad based index fund. This is going to be an important video for people who like to pick stocks, active fund investors, people who prefer ETF investing, index fund investing, and anyone else who has money in the stock market. Check out My Recommendations (Purchasing anything here funds the free content on this channel): 📊 Personal Finance Bundle Wait List: https://bit.ly/4bpyTHT Work with an hourly fee financial planner here: https://bit.ly/48mrWaF 📝 Boldin - The retirement planning tool I use to make sure I'm on track with saving for retirement. It's perfect for "Do it yourself" investors https://bit.ly/3EAAhrJ 💬 Sign up for 1 on 1 coaching with me: https://bit.ly/4bAUpYT 📖 Free copy of my Spending Review Spreadsheet: https://bit.ly/48lMVZ1 Do actively managed funds outperform index funds? The short answer is "yes", but there's a catch. In the short term, actively managed investment funds can do well but over the long term 94% of them underperform someone who invests in a broad based traditional index fund or index fund ETF. Why actively managed funds exist is simple- to generate money for the people who own/run the fund through the high fees that they charge. I believe that they honestly think they can outperform the stock market, but they know the probabilities are extremely low. Therefore, it's basically a cash grab for the suits on wall street. SPIVA releases a yearly scorecard where they report on how may actively managed funds outperform a comparable index. They break it down by individual benchmarks, but with all domestic funds 90% of actively managed funds underperform over 20 years. When we take into account risk-adjusted returns they find that 95% of them underperform. Since most investors should be investing for the long term it makes sense to focus on the track record for 20 or more years. What's very rarely talked about is how many of these actively managed funds had to shut down over that time period because their performance was horrible. SPIVA found that after 20 years, 70% of actively managed funds went out of business due to poor performance. Affiliate Disclaimer: Some of the above may be affiliate links. Support the channel by signing up or purchasing through those links at no additional cost to you. I appreciate you for helping me keep this channel running Disclaimer: This video is for entertainment purposes only. Everyone's situation is different so do your own research before making any decisions with your money. If you need help then contact a Certified Financial Fiduciary before trying anything that is mentioned in this video. I prefer a Fiduciary financial advisor that charges an hourly fee as opposed to an ongoing fee based on a % of your portfolio. Always remember that incentives determine the type of advice they give you so one that charges an hourly fee is less likely to be problematic.