This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Proof Active Funds Are a Waste, All in One Place

The SPIVA report showed that active funds didn't perform as well as many expected during the last two market downturns. When looking at all active large, mid and small-cap funds, the report found that anywhere from 54.3% to 83.8% were outperformed by their respective index during the 2000-2002 and 2008 bear markets.

Percentage of active funds underperforming benchmark ('00-'02 bear market, SPIVA data)

All large-cap funds: 53.5%

All mid-cap funds: 77.3%

All small-cap funds: 71.6%

Percentage of active funds underperforming benchmark ('08 bear market, SPIVA data)

All large-cap funds: 54.3%

All mid-cap funds: 74.7%

All small-cap funds: 83.8%

I've read SPIVA reports for years, and the results are fairly consistent. Although considered boring by many and often ridiculed by investment pros, index funds are one of the best investment vehicles for individual investors. In fact, institutional investors have used index-type investments for years. In most cases, you would usually be better off just choosing an index fund.

This underscores the importance of looking for impartial information on a fund before you buy into it. Of course, due diligence still doesn't guarantee that you won't get burned. Even if a fund can honestly boast index-smashing performance, that won't necessarily continue after you invest. Even mutual fund giants like Legg Mason's Bill Miller, whose fund beat the S&P 500 for over a decade, and plenty of star hedge fund managers like John Paulson, have having some bad years lately.

More from AdviceIQ

Poor, misunderstood Bill Gross never said equities are dead

Buy Apple because you love the iPad? emotional investing red flags

Don't let frugality define retirement quality of life

--By Neil Vannoy, president of Vannoy Advisory Group , a fee-only financial planning firm with offices in Round Rock, San Antonio and Waco, Texas, for AdviceIQ

AdviceIQ is a network of financial advisors that writes insightful articles for the public about investing and wealth management. All articles are edited by AdviceIQ's editor in chief, Larry Light. AdviceIQ certifies that all its advisors have no regulatory infractions.

To subscribe to AdviceIQ's Rss feed for personal finance articles written by financial advisors and AdviceIQ editors, click here .

Follow AdviceIQ on Twitter at @adviceiq.

2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs