Active Funds and Real Returns
Many people think active funds always give better returns. But long data shows a very different story. A long study looked at active funds in the US over almost 30 years, from 1992 to 2022. Only active funds were checked, not passive ones. Their returns were compared with the S&P 500 index, which gave around 9.46% return per year in this period.
How Most US Active Funds Performed
The data clearly shows that most active funds did not do well. About 59% of the funds did not even survive for the full 30 years.
Around 31% of the funds survived but gave lower returns than the index. Only 10% of the funds both survived and gave better returns than the index. This means finding a winning active fund is very hard.
Outperformance Is Rare
Some funds did give high returns, like 10%, 11%, or even more. But these were very few. Most funds stayed below the index return. To be in the small group of winning funds, you need a lot of luck. First, the fund must survive for many years. Second, it must beat the index again and again.
Indian Funds: 10-Year Reality
When we look at India, the picture is also very clear. Over a 10-year period, around 70% of large-cap funds could not beat their benchmark.
In ELSS funds, about 82–83% failed to beat the benchmark. In mid and small-cap funds, nearly 80% could not do better. Bond funds did even worse, with almost 95% failing to beat their benchmark.
Shorter Periods Show Same Pattern
Even in a 3-year period, the story stays the same. Around 65% of large-cap funds, 50% of ELSS funds, and nearly 80% of mid and small-cap funds failed to beat their benchmark. Bond and government bond funds also showed very high underperformance. This shows underperformance is not just a long-term issue.
What This Data Tells Us
This data makes one thing very clear. Outperformance in active funds happens only in small pockets. Picking the right fund and the right manager for many years is very tough. Investing blindly in any active fund can easily put your money into a poor performer. This is why understanding data before investing is very important.
