Since 1983, when the small stocks surge ended, the performance of
the average mutual fund has been worse, falling nearly 1^1 ⁄ 2 percentage
points per year behind either the Wilshire 5000 or the S&P 500 Index.
The percentage of general equity funds that has outperformed
the Wilshire 5000 and the S&P 500 Index each year from 1972 to 2006
is displayed in Figure 20-1. During this 35-year period, there were
only 11 years when a majority of mutual funds beat the Wilshire 5000.
All but 2 of these years occurred during a period when small stocks
outperformed large stocks. In the last 25 years there have been only
5 years when the average equity mutual fund outperformed the broad
market.
The underperformance of mutual funds did not begin in the 1970s.
In 1970, Becker Securities Corporation startled Wall Street by compiling
the track record of managers of corporate pension funds. Becker showed
that the median performance of these managers lagged behind the S&P
500 by 1 percentage point and that only one-quarter of them were able to
344 PART 5 Building Wealth through Stocks
FIGURE 20–1
Yearly Percentage of General Equity Funds That Outperform the S&P 500 and the Wilshire 5000
(Excluding Sales and Redemption Fees), 1972 through December 2006