Once Again Simplicity Wins on Wall Street

Published

December 30, 2021

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In the investing world, 2021 will be remembered for the year that Wall Street went mainstream. More and more Americans dabbled in the market due to low returns in bonds and savings accounts, as well as having a lot of free time on their hands thanks to the pandemic. The term “meme” stock was crowned in 2021 as companies such as GameStop and AMC saw returns quickly skyrocket and then plummet based largely on online sentiment from a new breed of investor. There are now thousands of financial shows, publications and web sites dedicated to helping the average investor understand the stock market and make stock picks. It’s become almost a sport for some as people are now looking to the market for big gains and they track their favorite stocks as they would their favorite sports teams. But once again 2021 showed savvy and new investors alike something that many long time Wall Street watchers have figured out — simplicity often wins out on Wall Street. The many Wall Street money managers that manage various mutual funds designed to outperform the market were unable to beat the overall market in 2021. In fact, the returns of 85% of mutual funds trailed the S&P 500’s 28% return in 2021. The S&P 500 Index, which is made up of the country’s 500 largest companies, is one of the simplest, low-cost investments an investor can make and it handily beating many actively managed funds. In most years this very simple investment is likely to outperform the returns of managed mutual funds. 2021 was no different.

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