If you ask ten people for stock tips, you'll get ten reasons to pay someone smart to manage your money. Surely a professional with a Bloomberg terminal and a CFA can beat the market, right?

The data says otherwise. And it has said otherwise for sixty years.

The numbers nobody disputes

S&P Global publishes the SPIVA scorecard twice a year. It compares actively-managed funds (the ones run by professional stock pickers) against the boring index they're trying to beat.

The most recent edition tells the same story every edition has told:

  • Over 1 year, roughly half of active US large-cap funds beat the S&P 500.
  • Over 5 years, about 13% beat it.
  • Over 15 years, fewer than 10% beat it.

Read that again. Out of 100 fund managers, fewer than 10 beat a fund that does literally nothing. Just owns the whole market and charges you 0.05% a year.

Why this happens

It isn't because the managers are stupid. They're often quite sharp. It's because:

  • The market is the average of everyone in it. By definition, the average active investor matches the index, minus the fees they charge for trying.
  • Fees compound just like returns do. A 1.5% expense ratio over 30 years eats roughly 35% of your final balance. That's the active manager's whole house, on you.
  • Past performance doesn't predict future performance. The fund that beat the market last year is no more likely to beat it next year than a coin flip. SPIVA confirms this directly: persistence is statistically indistinguishable from luck.

The boring answer

The boring answer (the one we built FromUs around) is that you buy the whole market, hold it for a long time, and stop trying to be clever. A global all-world ETF like VWCE owns about 3,700 companies in 47 countries for 0.22% per year.

That's the trade. You give up the dream of beating the market. You get, in exchange, eighteen years of compounding that quietly outperforms most of Wall Street. Not bad for a child who can't yet hold a spoon.

Further reading: SPIVA scorecard (S&P Global), "A Random Walk Down Wall Street" by Burton Malkiel, and Jack Bogle's The Little Book of Common Sense Investing.