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.
Even the most experienced investors aren’t immune to emotional influences. In fact, fear and overconfidence frequently cloud our investment decisions, often leading to poor outcomes. PAUL RICHARDS from Better Decisions explains that emotions evolved to keep us safe — but they don’t help much when it comes to modern investment decisions. Fear can drive us to sell at the wrong time, just as hope and greed might encourage excessive risk. The challenge is learning to spot when em
Robin Powell
May 19, 20254 min read
SUBSCRIBE
Simply provide your email address to receive our regular update.
