Terry Savage: Don't try to beat the market; be the market

Terry Savage, Tribune Content Agency on

So you think you can beat the market? You watch business television all day and sign up for expert newsletters. You stay ahead of the “game” in understanding what’s next in technology, and you chat in online forums exchanging ideas with others “in the know.”

How well are you doing so far? Since the start of the year, the S&P 500 is up about 14%, as we near the end of September. It was primarily led by a few big tech stocks (Apple, Microsoft, Amazon, Alphabet/Google, Meta/Facebook), so you could have easily beat the average numbers by owning just those tech stocks.

This is the time to evaluate your performance this year. Check online, or the third quarter statement for your brokerage account or 401(k) will be arriving in the mail any day. Did you “beat” the market with the portion of your funds designed to do that? What did you pay for that advice, and is your performance net of all fees?

Even the pros have a tough time beating the market. The new SPIVA report from S&P Dow Jones Indices, details the performance of professional money managers vs the averages. It revealed, once again, that it’s tough to beat the market — even when you’re getting paid a good salary to do so.

This latest report covers only the first six months of the year, when the S&P 500 Index gained 16.9%. (As of this writing the S&P 500 is up about 14% year-to-date.) The index has had a significant rebound from its decline of 18.1% in 2022.

Yet 60% of all active large-cap U.S. equity managers underperformed the S&P 500! Darts, anyone? And the longer-term picture for active managers is even more dismal.


According to the report, a majority of large-cap managers outperformed in only three of the last 23 years! You’d have better odds of winning in Las Vegas, than of finding the few large cap (large company) fund managers that beat the stock market on a consistent basis.

Some think it is easier to pick winners among smaller companies. And the SPIVA results demonstrate that: 52% of mid-cap managers beat the benchmark S&P MidCap 400, while 72% of small-cap managers outperformed the S&P SmallCap 600 so far this year.

But that performance is relative. Overall, for the first six months of the year, the S&P MidCap 400 increased 8.8% and the S&P SmallCap 600 returned 6.0% — far less than the large cap index.

If stock-picking is your hobby, or your business, go ahead and enjoy the thrills. I’m not here to dissuade you because you provide liquidity for the market! But if you are simply trying to make sensible decisions about your long-term retirement funds, there are some lessons here:


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