Note that the average fund significantly underperformed the broader stock market averages. Most funds are actively managed by professionals who try to beat the market. In contrast, broad, low-cost index funds that simply aim to track the markets have generally done their job well.
For example, the Vanguard Total Stock Market Index Fund returned 12.3 percent for the quarter and 26.1 percent for the year, outperforming both the average fund and the S&P 500. That, in a nutshell, is why I believe That said, for most people it's better to use low-cost index funds.
Most global markets continued to perform well in 2023 – and as usual, the average fund underperformed market returns. For example, a major global benchmark, the MSCI All Country World Index (often known as ACWI), returned more than 21 percent in 2023. The average international fund in the Morningstar database returned just 14.3 percent
Of course, individual stocks performed significantly better than average. Nvidia, which makes advanced computer chips, rose 239 percent in 2023. Meta, Facebook's parent company, rose 194 percent after falling 64 percent the previous year due to investor skepticism about the company's then-focus on the so-called Metaverse. In 2023, however, these big tech stocks benefited from the artificial intelligence craze, boosting the S&P 500. Perhaps even more surprising, cruise lines also saw an increase: Royal Caribbean rose 162 percent and Carnival rose 130 percent. If you had focused on any of these stocks at the start of 2023, you would have been a winner.
On the other hand, most stocks underperformed the averages. Dollar General, Moderna and Estée Lauder, all major S&P 500 stocks, lost more than 40 percent in 2023.
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