The managers running the biggest active funds picked stocks that beat the market in 2025 — and most still lagged their benchmark. A Morningstar do-nothing experiment and a body of academic research explain why active funds underperform even when the picking is good: skilled buying undone by poor selling, the hidden cost of trading, and the incentives that keep managers churning. The UK evidence points the same way.
The investing industry gives the impression that beating the market is all about skill, but the evidence tells us it's largely a game of chance This is the third article in our 12-part series on Mark Hebner's "Index Funds: The 12-Step Recovery Program for Active Investors." Missed the previous steps? Catch up here on Step 1 and Step 2. If Nobel Prize-winning research wasn't enough to convince you that active investing is futile, perhaps the brutal statistics on stock picking
TEBI
Jun 19, 20253 min read
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