Evidence-Based Investment Insights: Financial Gurus and Other Fantastic Creatures

But maybe you know of an extraordinary stock broker, fund manager or media guru who strikes you as being among the elite few who are up to the challenge. Maybe they have a stellar track record, impeccable credentials, a secret sauce or brand-name recognition. Can you rely on their latest forecasts?

Let’s set aside market theory for a moment and consider what has actually been working. Bottom line, if investors could depend on expert stock-picking or market-timing forecasters, we should expect to see credible evidence of it, with more “winners” than random chance would explain.

A substantial body of evidence illustrates how difficult persistent outperformance can be. Each season’s crop of star performers often fails to survive, let alone persistently beat comparable market returns moving forward.

Plus, the best way to profit from a guru’s stellar track record requires you to jump on their band wagon while they are still on a hot roll, so you too can profit from their future success. In the absence of a time-travel machine, this is once again a daunting challenge.

To cite one of many sources, Morningstar publishes a semiannual Active/Passive Barometer comparing actively managed funds with their passive peers. In its Midyear 2026 report, Morningstar found that 40% of active strategies survived and beat their average passive counterpart over the 12 months through June 2026.

That means a majority of active strategies did not survive and outperform their passive counterparts during that period.

The longer-term results remained challenging. Morningstar found that just 25% of active strategies survived and beat their passive counterparts over the 10 years through June 2026.

Results vary considerably by investment category, and Morningstar found stronger long-term active-management success rates in some fixed-income and real-estate categories. Still, the data illustrates the difficulty investors can face in identifying an outperforming active strategy in advance and sustaining that advantage over time.

Across the decades and around the world, a multitude of academic studies have scrutinized active manager performance.

• Among the earliest such studies is Michael Jensen’s 1967 Journal of Finance paper, “The Performance of Mutual Funds in the Period 1945–1964.” He concluded there was “very little evidence that any individual fund was able to do significantly better than that which we expected from mere random chance.”
• More recently, Eugene Fama and Kenneth French published a 2010 Journal of Finance study, “Luck Versus Skill in the Cross Section of Mutual Fund Returns,” demonstrating that “the high costs of active management show up intact as lower returns to investors.”
• In 2016, a pair of professors from the University of North Florida published “A Review of Studies in Mutual Fund Performance, Timing and Persistence,” scrutinizing more than 60 of the “more widely cited works” on fund performance.
• Yet another study, “Mutual Fund Performance at Long Horizons,” appeared in the January 2023 Journal of Financial Economics. Its authors concluded that fund managers still struggled to outperform the market (as proxied by the S&P 500). They estimated “an aggregate wealth loss to mutual fund investors of $1.02 trillion,” based on long-horizon mutual fund underperformance. In separate commentary, the authors wrote, “This wealth loss reflects the combined effect of mutual fund fees and investors’ timing decisions.”