Over long stretches, most actively managed stock funds lag their index after fees, and the few that win rarely keep winning, so you can’t pick them ahead of time. Put your stock money in a broad index fund that charges 0.10% a year or less, and hold it through the down years.
Over the 20 years ending June 30, 2026, 92.6% of actively managed large-cap U.S. stock funds trailed the S&P 500, according to S&P Dow Jones Indices’ SPIVA scorecard. Across all U.S. stock funds, 94.9% trailed their benchmark over the same stretch.
Cost is the part you can see in advance. Weighted by assets, the average actively managed stock mutual fund charged 0.64% a year in 2025, against 0.05% for index stock mutual funds, according to the Investment Company Institute. A manager has to beat the market by that difference every year just to break even with an index fund.
Picking one of the winners doesn’t work either. S&P’s persistence study took the large-cap funds ranked in the top quarter in 2021, and not one of them held that rank in each of the next four years.
So choose a fund that tracks a broad index, like the S&P 500 or the total U.S. stock market, and check its expense ratio on the fund’s page before you buy. With index stock funds averaging 0.05%, a fee above 0.10% means you’re paying extra for the same index.
The difference compounds. Assuming a 7% yearly return before fees, $10,000 grows to about $75,000 in 30 years at a 0.05% expense ratio and to about $63,600 at 0.64%, a gap of about $11,500.
In a 401(k), look for the plan’s S&P 500 or total market index option and compare its expense ratio with the actively managed choices beside it.
Then leave it alone. An index fund earns the market’s long-run return only for investors who are still holding it after the bad years, so resist selling when prices drop.
The edge you control isn’t finding the next star manager. It’s keeping the fee difference in your own account, every year.
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