Stock Pickers Vs S&P 500
Updated: Mar 19
Since March of 2020 we saw a lot of success stories involving the market. However, compared to the S&P 500’s 18% gain, 60% of US large cap stock picking funds underperformed. This is actually the 11th year in a row that stock pickers did worse than the market.
You might question how this is possible, seeing as almost everything was rebounding since March of last year. A lot of the S&P’s gains came from large tech companies. Amazon and Apple are up 76% and 81% respectively since last year. These two companies make up more than 10% of the entire S&P and most stock pickers don’t have the means to buy tons of shares of those companies.
Different funds had a wide array of returns. American Fund’s Growth Fund of America hit a staggering 38% return, outperforming the S&P by more than double. Active managers dealing with mid-cap stocks had average returns of 51%, while those involved in small-cap were closer to 46%. Some believe that gains are easier to come by on smaller companies, as they aren’t analyzed as thoroughly.
The biggest winners from last year were large-cap growth funds, who were up 62%, and large-cap value funds, who ended the year with 67% gains.
By the end of 2019, $6.6 trillion was being actively managed within the S&P, while only $4.4 trillion was passive within the index. Look to see how this allocation changes after most failed to beat the market in a year full of opportunities.