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Expand chart
Data: S&P Dow Jones Indices; Chart: Axios Visuals

Not all investors are trying to beat the market. According to S&P Dow Jones Indices, a record $5.4 trillion was parked in funds that passively track the S&P 500 at the end of 2020.

Why it matters: There’s plenty of data that shows most individual investors, and even professional money managers, can’t beat the S&P 500 by actively managing their stock portfolios.

By the numbers: At the end of 2008 during the financial crisis, there was just $915 billion worth of assets indexed to the S&P 500. The S&P closed at 903 that year.

  • As passive investing has become increasingly popular, assets indexed to the S&P nearly sextupled (+493%) to $5.4 trillion in 2020 as the index itself quadrupled (+316%) to 3,756.
  • About 60% of large-cap equity fund managers underperformed the S&P 500 in 2020, according to a separate report from S&P Dow Jones Indices.
  • This was the 11th straight year that a majority of these professional stock pickers lagged that benchmark.

Yes but: The active fund management business is alive and well.

  • Just over $8 trillion in actively managed funds use the S&P 500 as their benchmark for performance.

State of play: Even the pros who perform well in a given year are rarely able to stay on top.

  • S&P Dow Jones Indices found that of active large-cap equity fund managers in the top-performing half of their peer group in 2016, just 23% remained in the top in 2017. Only 10.5% repeated the feat three years in a row.
  • And just 4.2% of active large-cap equity fund managers were able to stay in the top half for five consecutive years through 2020.

The bottom line: While historical odds favor investors who only aim to match the performance of the S&P 500, the allure of beating the market will continue to have investors wagering trillions.

Editor's note: This post has been corrected to say that the assets indexed to the S&P 500 sextupled and the index itself quadrupled from 2008 to 2020 (not quintupled and tripled).

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