Wait Till Next Year
EVERY YEAR, I READ somewhere that it's going to be a stock picker���s market. These stories suggest I need an active manager to nimbly skip down Wall Street, picking the daisies and avoiding the weeds.
Then the annual results roll in. That unmoving and unmanaged S&P 500 Index fund has somehow, unaccountably, beaten those deft active managers at their game.
The S&P 500���s return of 28.7% in 2021 beat 85% of actively managed large-cap U.S. stock funds, according to S&P Dow Jones Indices. The active set returned an asset-weighted average of 23.3%. That���s a great year, except in comparison with their relentless competition.
These results can hardly be called news. This is the 12th consecutive year that Jack Bogle���s invention has bested the majority of active large-cap fund managers. I���d imagine that most active managers are handsomely paid. But what are their investors thinking?
To be fair, some might be invested in those few funds whose managers do exhibit a magic touch, like the Windsor Fund when it was run by John Neff. It beat the S&P 500 handily over a 31-year run. Others could be sitting on significant profits, and don���t want to trigger capital gains taxes by selling.
But in large part, the allure of active management seems like a win for marketing. When considering the competition, Gus Sauter, onetime manager of Vanguard���s S&P 500 index fund, liked to quote Samuel Johnson on second marriages. Active management, he said, ���is the triumph of hope over experience.���
Alternatively, active fund investors could borrow a phrase from the perennially disappointed Brooklyn Dodgers��� fans of the 1950s: ���Wait till next year.��� Because experts suggest that 2022 will be���you guessed it���a stock picker���s market once again.
Then the annual results roll in. That unmoving and unmanaged S&P 500 Index fund has somehow, unaccountably, beaten those deft active managers at their game.
The S&P 500���s return of 28.7% in 2021 beat 85% of actively managed large-cap U.S. stock funds, according to S&P Dow Jones Indices. The active set returned an asset-weighted average of 23.3%. That���s a great year, except in comparison with their relentless competition.
These results can hardly be called news. This is the 12th consecutive year that Jack Bogle���s invention has bested the majority of active large-cap fund managers. I���d imagine that most active managers are handsomely paid. But what are their investors thinking?
To be fair, some might be invested in those few funds whose managers do exhibit a magic touch, like the Windsor Fund when it was run by John Neff. It beat the S&P 500 handily over a 31-year run. Others could be sitting on significant profits, and don���t want to trigger capital gains taxes by selling.
But in large part, the allure of active management seems like a win for marketing. When considering the competition, Gus Sauter, onetime manager of Vanguard���s S&P 500 index fund, liked to quote Samuel Johnson on second marriages. Active management, he said, ���is the triumph of hope over experience.���
Alternatively, active fund investors could borrow a phrase from the perennially disappointed Brooklyn Dodgers��� fans of the 1950s: ���Wait till next year.��� Because experts suggest that 2022 will be���you guessed it���a stock picker���s market once again.
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