This is a disappointing answer. Yes, most firms don't manage to beat the market average. The apparent answer would be that about half of them do, probably slightly fewer due to occasional runaway successes.
What you seem to be saying is that there is a complex system guaranteed to beat the expected return of buying and holding a single stock. I don't see how this can be true, although it's certainly possible that the lower volatility is preferable enough to offset the slightly greater costs.
Do you really believe that it is 'exceedingly unlikely' that a firm would exceed the market average for a 15 year period? I haven't done research into this, so I'm happy to learn. Instinctively, it would be a pretty frequent occurrence.
Are you saying that more than 95%[1] of the individual underlying stocks held by a major index fund will underperform the market over a 15 year period? If yes, how can this be? If not, what are you saying? Are you a betting man?
Surely some firms will do better than average, it's just that humans are notoriously bad at anticipating which firms those will be, hence the superior performance of index funds compared to managed mutual funds over the long term.
What you seem to be saying is that there is a complex system guaranteed to beat the expected return of buying and holding a single stock. I don't see how this can be true, although it's certainly possible that the lower volatility is preferable enough to offset the slightly greater costs.
Do you really believe that it is 'exceedingly unlikely' that a firm would exceed the market average for a 15 year period? I haven't done research into this, so I'm happy to learn. Instinctively, it would be a pretty frequent occurrence.
Are you saying that more than 95%[1] of the individual underlying stocks held by a major index fund will underperform the market over a 15 year period? If yes, how can this be? If not, what are you saying? Are you a betting man?
[1] "Extremely Unlikely" is typically defined as a less than 5% chance. Here's an example: http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ch1s1-6....