Mutual Funds Lose Again

In a nod to semistrong form efficiency, a recent report from Standard & Poor's indicates that 74 percent of actively managed stock funds underperformed the market over the past three years. Another report shows that only 5 percent of stock funds remain in the top 25 percent of stock funds two years after the initial ranking. Perhaps even worse, large-cap stocks funds have trailed the S&P 500 by 52 percent on average over the past five years. All in all, if a group of highly motivated, well-educated, and well-compensated individuals cannot outperform the market, this is an indication that the market is relatively efficient.