Around 80–90% of professional fund managers and individual investors fail to outperform the S&P 500 consistently over the long term. This is a key reason why many financial experts advocate investing in low-cost index funds that track the S&P 500 instead of relying on active stock picking or market timing.

Mutual Fund Performance

According to the SPIVA (S&P Indices Versus Active) reports, which track the performance of actively managed funds against their respective benchmarks:

• • Over 80% of actively managed large-cap funds underperform the S&P 500 over a 10- or 15-year period
• • The numbers are often worse over longer periods: about 90% of actively managed funds fail to beat the index over 20 years

Individual Investors

When it comes to individual retail investors:

• • Research from firms like Dalbar has shown that the average retail investor significantly underperforms the S&P 500 due to emotional decision-making, poor timing of market entry and exit, and overtrading.
• • Over 20 years, the average individual investor often earns returns 3–5% lower than the S&P 500 annually

Here are some ideas and tips that can help you on your investment path.

Investing should be boring

Investing is often said to be “boring” because successful long-term investing typically involves patience, discipline, and avoiding constant action or excitement.

1. Long-Term Focus

Boring investing is about thinking long-term. Instead of constantly chasing the next hot stock or market trend, a successful investor focuses on steady, consistent growth over time. Most wealth is built over decades, not by quick, exciting trades.

2. Avoiding Emotional Decisions

Exciting, fast-paced investing often leads to emotional decision-making, which can result in poor choices.

Fear and greed can cause investors to panic during market drops or chase after risky trends during bubbles. A boring, disciplined approach helps keep emotions in check and prevents impulsive reactions to market volatility.

3. Lower Costs and Fewer Mistakes

Active trading can be costly due to fees, taxes, and potential mistakes. A boring strategy-like investing in broad index funds and holding for the long term-reduces transaction costs and minimizes errors that come with frequent buying and selling.

4. Compounding Works Over time

Boring investing strategies often rely on compounding returns, which work best when left untouched over time.

The more time you give your investments to grow, the more powerful compounding becomes. Constantly tweaking or trading can disrupt this powerful effect.

5. Avoiding Market Timing

Trying to time the market-buying low and selling high-is exciting but nearly impossible to do consistently.

Most investors who attempt it end up missing the market’s best days, which can significantly reduce their returns. A boring, steady approach avoids market timing and embraces the long-term trend of market growth.

6. Simplicity Wins

Boring investing is often simple, relying on low-cost index funds or diversified portfolios.

Simplicity reduces complexity and risk, allowing investors to avoid the pitfalls of overcomplicating their strategies with too many trades or speculative investments.

7. Consistency Beats Excitement

The most successful investors, like Warren Buffett, are known for their patient, consistent approach to the markets.

They don’t chase the excitement of day-to-day market movements but instead focus on building wealth through steady, methodical choices.