Index funds vs picking stocks in NZ: fewer than 1 in 5 pros beat the index

Buying a single company's shares on your phone feels like investing. The app is clean, the ticker goes green, and you tell yourself you've done your homework on this one. It feels like skill. Here's the uncomfortable part: the people who do this for a living — fund managers with Bloomberg terminals, research teams and decades of experience — mostly lose to a simple index fund. Over 10 years, 84% of professional US large-cap managers underperform the S&P 500. Over 15 years, 89.5% do. If they can't beat it, the odds that you will, picking stocks yourself on Sharesies or Tiger Brokers, are poor. In this episode, SortMe Resident Money Writer Hugo Jonston walks through one of the most replicated findings in finance — how often the professionals beat the market, why the few who manage it are mostly lucky, and what the evidence says about the best way to grow your money over the long run. SortMe Founder & CEO Carl Thompson shares the moment he learned the comparison on his own money: after selling his previous company, he kept a Sharesies account for picking companies himself while the bulk of the proceeds went into professionally managed funds. *"I was picking stocks because I found it fun and interesting, and my picks were returning about 14 percent, which felt great. Then I compared it with the managed funds (running on Fama basis), which were doing 22. Side by side, the two numbers ended the argument. There was no point in me doing individual trading, and the only reason I'd never noticed was that I'd never made the comparison."* In this episode: - The SPIVA scoreboard — 65% of US large-cap funds underperform the S&P 500 over 1 year, 84% over 10 years, 89.5% over 15 years, and the pattern gets worse the longer you measure - Why the winners are mostly lucky — William Sharpe's *Arithmetic of Active Management* (as a group, active managers *cannot* beat the index after costs), Fama and French's *Luck versus Skill* study, and the S&P Persistence Scorecard showing *not one* of 2020's top-quartile US funds was still there four years later - Why the whole premise of picking stocks is thin — Fama's efficient-markets insight that a share's price already reflects the publicly available information, leaving only two possible edges (illegal insider information, or a guess about a future nobody knows) - The Barber and Odean bombshell — *Trading Is Hazardous to Your Wealth*: heavy individual traders averaged 11.4%/year while the market returned 17.9%, and a later day-trading study found fewer than 1% made money predictably after costs - The comparison that hides the damage — $10,000 at 11.4% becomes ~$87,000 over 20 years; at 17.9% it becomes ~$269,000. You can be in the green and still losing a house deposit to the boring option, and unless you make the comparison you'll never feel it - Carl's own 14% vs 22% moment — the amateur picker sits below the pros, and the pros mostly sit below the index; each rung up the ladder involves *less* picking, not more - The design language of the apps — green numbers, notifications, watchlists, one-tap buy buttons, and the trading-platform business model that earns more the more you trade (Sharesies 1.9%, 0.5% FX, Tiger Brokers per-order commissions), with zero transaction fee on Sharesies managed fund orders sitting right there in the same app - Why the boring strategy wins — an index fund is a tiny slice of hundreds or thousands of companies at once, no single collapse can wipe you out, and Sharesies itself launched in 2017 offering funds only (individual companies didn't arrive until it joined the NZX mid-2019 — the evidence was baked into the original design) - Where SortMe fits — putting KiwiSaver, investments, savings, property and net worth on one screen, so the number you're watching is the total wealth growing over years, and Carl's comparison is on screen for every household from day one Read the full article: sortme.com/post/index-funds-vs-picking-stocks-nz