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.
Two investors can study the same rising market and reach opposite conclusions about what comes next. A new MIT working paper spanning 68 years finds that only the contrarian, sophisticated forecast has ever reliably predicted returns, while the bullishness of ordinary investors — the instinct behind chasing returns — predicts little or points the wrong way. Here is what seven decades of evidence say that feeling is really worth.
Robin Powell
Jun 227 min read
SUBSCRIBE
Simply provide your email address to receive our regular update.
