Fool analyst Austin Smith reviews the fiscal year 2012. The S&P 500 was up 16% and hit a five-year high. The Dow was up 7.3%. Most money managers didn't do as well: 65% of large-cap managers underperformed the S&P 500 as did 80% of large-value investors; 67% of small-cap managers didn't beat the Russell 2000 index.
Why was this? Management fees charged by professionals will reduce investor returns. More importantly, money managers may have reacted emotionally to all the bad economic news during the year (Greece, China, the fiscal cliff) and sold stocks prematurely.
What to do? Either buy an index fund or go the Fool route. That is, buy great companies for the long haul. For all the volatility of the markets, Apple was up 31% for the year, Wells Fargo 23.4%, Amazon.com 40%, and 3D Systems 247%. Austin believes buying and holding great companies like these will deliver superior results compared to professional money managers.
