There is a feeling that stops a lot of people from buying a simple index fund. It sounds like giving up. Why accept the average return of the whole market when, with a little effort or the right manager, you could surely do better? Along the Florida Panhandle, where folks pride themselves on hard work and self-reliance, settling for average can feel almost un-American. But in investing, the word average hides one of the most powerful wealth-building engines ever measured. Choosing the market is not surrender. For most people, it is the smartest move on the table.
For anyone planning to retire to the beach and stretch their savings across decades, this is worth getting right. The story we tell ourselves about beating the market is mostly a story. The numbers tell a very different one.
Beating the Market Is Far Harder Than It Looks
Every year, professional money managers wake up determined to outperform their benchmark. They have research teams, expensive data, and decades of experience. And every year, most of them fall short.
The clearest evidence comes from the SPIVA Scorecard, published by S&P Dow Jones Indices, which has tracked active managers against their benchmarks for more than two decades. In 2024, about 65 percent of actively managed large-cap U.S. stock funds underperformed the S&P 500. That was a worse showing than the 60 percent that lagged in 2023 and worse than the roughly 64 percent average across the scorecard's long history.
One bad year could be chalked up to luck. The trouble for active management is that the picture gets worse, not better, the longer you look. Over the 15-year period ending in December 2024, nearly 90 percent of large-cap funds underperformed the S&P 500. Put plainly, the odds of having picked an active fund that beat the index over 15 years were roughly one in ten.
The Quiet Math of Fees
Why do so many skilled professionals lose to a simple basket of stocks? A big part of the answer is cost. Active funds charge more, because all that research and trading has to be paid for. Index funds, which simply hold the stocks in a benchmark, run on a fraction of the cost.
The gap matters more than it appears. Suppose an index fund charges a few hundredths of a percent each year while an active fund charges closer to one percent. That difference, compounded over 30 years on a meaningful nest egg, can add up to tens of thousands of dollars or more in lost growth. The active manager does not just have to be good. They have to be good enough to overcome their higher fees every single year, and the evidence says most cannot.
There is also a structural reality at play. All the investors in a market collectively earn the market's return before costs. After fees and trading expenses, the average actively managed dollar must, by simple arithmetic, trail the average passively managed dollar. This is not a knock on any one manager. It is math. Keeping costs low is one of the few levers you fully control, and it sits at the center of our investment management approach.
Why "Average" Is Anything but Mediocre
Here is the part that surprises people. The average return of the U.S. stock market is not modest at all. Over the long run, the S&P 500 has delivered something in the neighborhood of 10 percent per year on average before inflation. That figure bounces around wildly from year to year, but over decades it has been remarkably durable.
Now let compounding do its work. Money growing at roughly 10 percent doubles about every seven years, following the Rule of 72. A sum left alone for 30 years at that pace does not just grow. It multiplies many times over. The investor who simply captured the market return, kept costs low, and stayed invested ended up with far more than most of the clever folks who tried to outsmart it and paid extra for the privilege.
Average, in this context, is a finish line that most professionals never reach. Capturing it reliably is not settling. It is winning by not losing.
What This Means for a Retirement Portfolio
None of this means investing requires no thought. It means the effort belongs in the right places.
Keep your costs low. Every dollar you do not pay in fees is a dollar that stays invested and compounds for you. Low-cost index funds make that easy.
Stay diversified and stay invested. The market return is only available to people who actually remain in the market through the rough patches. Chasing last year's hottest fund or manager is one of the most reliable ways to underperform, because today's winners so often become tomorrow's laggards.
Spend your energy on planning, not prediction. The decisions that move the needle in retirement are about how much you save, how you manage taxes, how you handle withdrawals, and how you behave when markets fall. Those are within your control. Beating the market, for most people, is not.
The Bottom Line
The idea that index funds are a consolation prize gets the math exactly backward. Beating the market consistently is extraordinarily hard, the long-term data shows most professionals fail at it, and the simple market return compounds into genuine wealth for those patient enough to capture it.
Out on the Gulf, the steady boat that reaches the destination beats the flashy one that flips trying to cut a corner. Choosing the whole market, keeping costs down, and staying the course is not aiming low. It is aiming squarely at the outcome most active investors only wish they could reach.
This article is for educational purposes and is not personalized investment advice. Past performance does not guarantee future results. Consider speaking with a qualified financial advisor about your own situation.
