A comparison of historical performance of mutual funds and the S&P 500 suggests that:
A) most mutual funds consistently outperform the S&P 500.
B) active funds consistently outperform the S&P 500, and passive funds consistently underperform the S&P 500.
C) mutual funds outperform the S&P 500 when they are undervalued.
D) mutual funds on average underperform the S&P 500 at least half of the time.

Question

Quizplus · Accepted Answer

Studies have shown that on average, most mutual funds underperform the S&P 500 at least half of the time. While some active funds may outperform the index in certain time periods, it is difficult for fund managers to consistently beat the market. Passive funds, on the other hand, track the performance of the S&P 500 and therefore would not be expected to outperform or underperform it. Therefore, D is the most accurate choice.

A Comparison of Historical Performance of Mutual Funds and the S&P