It's incredibly difficult for the average investor to construct a portfolio of stocks in a way that beats the benchmark.
We've talked in the past about how more than half of U.S. large-cap equity funds underperformed the S&P 500 during each of the last 12 consecutive years.
Last Wednesday, the SPDJI published its latest Persistence Scorecard, which tracks the performance of each individual fund over time.
They found that funds that do beat their benchmark in a given year are rarely able to continue outperforming in subsequent years.
This information isn't meant to be scary or cause panic.
All this shows is that regardless of asset class or style focus, active management outperformance is typically short-lived, with few funds consistently outranking their peers or benchmarks.
So what does this mean for us as investors?
The important thing to consider is that having a diversified portfolio is essential for success now more than ever.
The days of simply placing money in an index fund and letting it sit are gone.
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