Say It Ain’t So, Joe – Again

“No large-cap, mid-cap, or small-cap funds managed to remain in the top quartile at the end of the five-year measurement period.”

This is one of the findings out this week from S&P / Dow Jones related to “the ability of top-performing funds to maintain their status” and persist as top performing funds.1

For many of us who have been in the industry for many years, this type of finding is hard to take. As I wrote in a 2015 piece titled Say It Ain’t So, Joe, sometimes I feel like the little guy in the movie “Field of Dreams”.

Until founding Fiduciary Wealth Partners in 2012, I spent my career promoting actively managed funds. I believed in them. I was quite good at selling them. I received an award one year for selling record amounts of active equity for the firm I worked for at the time.

Now, I sometimes wonder:

Was I wrong all those years?   How can this be?”

Like the little boy, who had learned of Shoeless Joe Jackson’s involvement in throwing the 1919 World Series, negative news about something we have believed in for many years is hard to take.

In the past, active management was the only game on Wall Street, and managers with hot hands were put on pedestals. Many of us grew up in an investment world that was dominated by reports of star active portfolio managers such as Warren Buffett or Peter Lynch.

Like most anyone, I believe that people who work harder should have an advantage. As with many things, however, it is not all about working harder. You need to work smarter, not let emotion get the better of you, and stay focused on the evidence about what works consistently over multiple long-term periods.

What does the evidence now consistently show?

“The best way to own common stocks is through index funds.”
– Warren Buffett, Berkshire Hathaway 1996 Shareholder Letter


“All the time and effort people devote to picking the right fund, the hot hand, the great manager, have, in most cases, led to no advantage.”
– Peter Lynch, Beat the Street, 1993

I have been drafting another piece, which I will publish soon, that might dispel some myths about index funds and counter the active managers who are sure to continue protesting loudly about how the promotion of index funds is worse than the “misuse of antibiotics.”

I’ll keep this short and simple this time, however, and just finish with a 2016 quote from another well-respected data analysis firm, Morningstar.

“In most cases, the odds of picking a future long-term [active management] winner from the best performing quintile in each category aren’t materially different than selecting from the bottom quintile.”2

Yes, it’s hard for many alpha-oriented investment personalities such as me to swallow, but the evidence in favor of index funds is real and consistent.

Stay it ain’t so, Joe. Say it ain’t so.


  1. S&P Dow Jones – Does Past Performance Matter? – The Persistence Scorecard
  1. Morningstar – Performance Persistence Among Mutual Funds


Preston McSwain is a Managing Partner and Founder of Fiduciary Wealth Partners, an SEC registered investment advisor committed to forming fiduciary wealth partnerships with clients, professional colleagues, and the community. To see more of his posts, and follow him on social media, please visit the following:


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