The problem is that people often play hunches or favorites, or stick with poor-performing funds when they shouldn't. And while there are some expenses to mutual funds, they're typically in the 0.5%-1% range. Frankly, if that's the difference between a fund outperforming an index or not, the fund essentially is break-even to begin with.

I'm no stock wiz myself. But I have two basic investments--one with Fidelity and the other with Vanguard. With Fidelity, my 1-year performance was 25.57%, versus 21.52% for the S&P 500 and 22.53% for the Dow Total Market Index. With Vanguard (with a much narrower selection because it's my company's 401(k)), my return was 25.1%. I wish both had performed better--more in line with NASDAQ. Still, both accounts did far better than the indices.

Over 10 years, my Fidelity account has had an annual return of 9.31%, compared with the S&P 500 of 6.83% and the Dow Total Market Index of 7.51%.

What's the secret? A lot of it is just avoiding the clearly bad choices. That meant avoiding money market funds and bond funds. And there are some sector funds that just didn't make sense, based on the U.S. economy. So you eliminate the bad options, and what's left has a good chance of outperforming the broad market.

I tend to go for the growth stocks, as do you. Your one loser was gold, which doesn't really fit into that model.

Your overall performance indicates you're doing it right. Congratulations.

League tables need looking at closely. For example funds started just after the 2008 crash will be showing very good performance now.

A managed fund should be able to outperform the market but not necessarily consistently. As they say "every dog has its day"! Furthermore the underperforming funds drop out of the tables, so you tend to only see the good ones!

Of course a passive fund, by contrast, can NEVER beat the market

I've seen stats that only 30% of managed funds beat the indexes. But another answerer made a good point, the big factor that makes index funds better in the long run is lower management fees for index funds. Take Vanguard funds, they are as low as .05% (for Admiral version, over $10K in the fund) versus 1% or more for some managed funds. I'm afraid we will face low returns in the next decade and that difference will really catch up to you over the long run.

If they aren't including fees, then you're comparing apples to oranges.

The fundamental question is "if I buy it now, and hold it for 20 years, how much can I sell it for?" Period.

Hi,

I have been reading many articles about how it's nearly impossible for an actively managed fund to beat an index fund over the long haul. Yet when I look at five of the funds I own, four have beaten the S&P 500 over the past 10 years according to this chart:

http://screencast.com/t/zxPgJY6Un4ul

What am I missing? Do the absence of fees skew this chart data? I don't think this Google chart factors in fund expenses, but it seems to me that there are quite a few funds that outperform the index. How can 80% of my funds outperform, when I am a novice at best with access to Morningstar like anyone else.

Thanks for any insight.