Fidelity Investments has no shortage of renowned actively managed mutual funds available to retail investors.
Names you might have heard of or even seen in your 401(k) lineup include Fidelity Blue Chip Growth Fund (ticker: FBGRX), Fidelity Contrafund (FCNTX) or even the famous Fidelity Magellan Fund (FMAGX), once managed by Peter Lynch.
Given their reputation and track records, you might think that buying and holding one of these for the long term is a sound way to beat the market, right? Think again.
Consider the results of the latest update to the S&P Indices Versus Active (SPIVA) scorecard, which benchmarks various fund categories against their respective index benchmarks. For example, U.S. large-cap funds compete against the S&P 500.
The current results are not favorable toward actively managed funds. Over the past 15 years up to Dec. 31, 2023, approximately 88% of all U.S. large-cap funds underperformed the S&P 500.
There are several reasons for this underperformance. Sure, some of it was due to poor stock picking by their managers. But a lot of it was likely due to high fees.
Active management is expensive – not just in terms of the time and expertise needed…
