You Can Beat the Index
A select group of funds has consistently beaten the index.
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MAY 2016
Investing in an index fund means investors won’t do worse than the overall market, but it guarantees they’ll never do better. So why settle for average?
Whatever your view on the indexing debate, the following is indisputable: A group of funds we call Select Equity funds has, on average, consistently topped the indexes over a range of time periods — from one to 10 years.
Here are the facts on these funds:
- Select Equity funds are identified using two widely available screening criteria: 1) fund expenses; and 2) How much fund managers have invested in the funds they manage, which we’ve labeled “manager ownership.”
- The universe of Equity funds was filtered based on those two criteria. Results for the group with expenses in the lowest quartile of its peer group and with manager ownership in the highest quartile were compared to indexes over a variety of time periods.
- These Select Equity funds beat the index and built considerably more wealth for investors, on average, than comparable index investments.
- The longer the time period, the greater the Select Equity group’s advantage over the index.
- Among the categories analyzed were U.S. Large-Cap Equity and International funds. Funds in these categories are pillars of many investors’ portfolios.
- Results for the American Funds included in these categories are even better, surpassing those of the Select Equity funds and the index.
Why It Matters
Index funds provide what the market delivers — nothing more, nothing less. The best investment managers can offer more, including the potential to beat the market and build more wealth.
Use our interactive scorecard tool to see how the Select Equity funds, as a group, delivered superior investing outcomes.
Download “Don’t Settle for Average” for a detailed look at the Select Equity group’s index-topping track record.
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