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 loves to make bold predictions. Financial commentators often appear in the media claiming to foresee market trends or economic turning points. But as history has shown, these forecasts are rarely accurate. While some patterns like increased volatility are more predictable, no one truly knows where the market is headed next. That’s why basing your investment decisions on short-term forecasts can do more harm than good. As Professor ELROY DIMSON explains,
Robin Powell
Jan 20, 20253 min read
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