As the company that pioneered the concept of index fund investing and currently has a whopping $11 trillion in assets under management, Vanguard is the ultimate heavyweight in the American stock market. (1) So when the company puts out a report about the future of the stock market it’s worth closer attention. In July, the company published a 10-year forecast for a wide range of asset classes, ranging from municipal bonds to mortgage-backed securities. (2) But it’s the forecast about stocks that should ra ...

Core Insights - Professionally managed funds have consistently underperformed the S&P 500, with 91% underperforming over the last 20 years, and a similar trend is expected in the future [1][12] - The Vanguard S&P 500 ETF (NYSEMKT: VOO) has outperformed 86% of professionally managed large-cap funds over the past five years, with a low expense ratio of 0.03% [2][5] Performance of Managed Funds - Approximately 54% of large-cap funds underperformed the S&P 500 in the first half of 2025 after accounting for fees, and over the last five years, 86.9% of funds underperformed the benchmark [3][9] - The odds of a random fund outperforming the S&P 500 before fees are about 50/50, but this drops significantly when fees are considered [9] Challenges for Professional Fund Managers - Competition among professional fund managers makes it difficult for any single fund to consistently outperform the S&P 500 [8][10] - The paradox of success indicates that funds that perform well in one year may attract more capital, which can dilute their investment options and lead to poorer performance in subsequent years [10] Investment Strategy - The recommended strategy for investors seeking better returns is to invest in index funds like the Vanguard S&P 500 ETF, which closely tracks the index and offers a straightforward path to outperforming most managed funds [13] - Consistently adding to a position in the ETF can enhance returns compared to actively managed funds, especially when fees are taken into account [13]