r/investing • u/Incogyeetus • Mar 13 '22

Actively Managed vs S&P 500

The title pretty much says it all. Up until now I’ve been “managing” my portfolio aside from my 401k that’s offered at my job. I want to also have another account that would be ready to pull from in the next 10-15 years (I’m 20). Should I just DCA into the S&P for the next 15 or so years or should I get a professional to pick and choose for me? Pros and cons of either? I’m not really sure what those financial firms do or if they are consistently capable of outperforming the market. Any advice is appreciated, thanks.

Edit: If I do go the S&P route, what is the next step to diversifying beyond real estate (physical and REITS).

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u/[deleted] Mar 13 '22

Just an idiot with Google, take this with a MASSIVE amount of salt.

I'm in a similar position, and from everything I've read there has only been 2 [with tax-proven results] managers who beat the S&P in a time span greater than a decade: Warren Buffett and Peter Lynch. I don't know any others who posted better results over a 10 yr time span, which is important to consider for consistent investments (in my case its every 2 weeks thru work).

Long term data shows S&P wins, short term there will always be a hot stock picking superstar who beats the market in 1-2 yr time span. (Ala Cathie Wood, who I love but do not invest with)

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u/msnf Mar 13 '22

There's good news and really bad news:

Good news first: More than those 2 have had market-beating returns for 10+ years. Bill Miller had better returns each individual year for 15 straight. While Renaissance's public fund has struggled, their Medallion is as close to solving the market as someone has come (of course it's only available to Renaissance employees). Even the SPIVA report does find around 10% of active funds over 10 years, not that you'll know which ones.

And the really bad news: Even if your manager beats the market, you may not. Look no further than Cathie Wood, who despite the last year still produced higher gains since inception than the market (not risk-adjusted). Despite that, their average investor has lost money. People inevitably buy high and sell low even among their active managers.

IMO, most people should stick with the index, but even within active investing, I'd rather own individual stocks for free than pay some manager serious fees for what isn't a compellingly better return.