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Active management continues to be costly for investors

Our site has always preached that active management is a losing strategy for investors (but a winning one for the financial industry). Is there anything new in 2009?

First, a study in 2009 commissioned by the federal government (the best friend of the banks) was forced to acknowledge the following:

Studies in both the United States and Canada have shown that active managed mutual funds do not perform better than passive investments in indexed and exchange traded funds. Given the management fees that are incurred as discussed below, investors therefore receive a lower return on their active managed investments compared to passive strategy investments. federal Finance Minister pension inadequacy study Mintz doc.1498

 
And a report from Standard & Poor in late 2009 indicated that only 5.9% of actively managed funds beat the index after five years; see  S & P .

Yet not only many (most?) individual investors continue to take an active approach, but even reputable organizations like the American Association of Individual Investors continue to advocate stock picking in an attempt to beat the market. When will they see the light?
 
2009: the end of a difficult decade
 
2009 was also the end of a difficult decade. Here's an overview:
 
Canada did well, with an increase of 40% of the TSX, excluding dividends; see Bloomberg (or as PDF doc.1499).

In the U.S., we can speak of a lost decade. Employment was  stagnant for 10 years, and it is not surprising that the U.S. stock market, measured by the S & P 500, went nowhere over ten years. This decade was one of the worst performing in American history. This is also explained by by a contraction of share valuations (measured by P / E ratios) since 2000;  see Econbrowser (or as PDF doc.1500) ; Worst Decade Ever WSJ ; and Arends (or as PDF doc.1501) .
 
Almost all asset classes outperformed the U.S. stock market, even cash and bonds. Stock markets in emerging countries gave the best returns over 10 years. For figures, graphs and tables, see CanadianCapitalist , TheReformedBroker (or as PDF doc.1502)   and TheCVapitalSpectator (or as PDF doc.1503)  .
 
Other government initiatives in 2009
 
The federal government continues to advance its plans for a national securities commission. There will likely be court hearings since at least two provinces are opposed.
 
Outlook for 2010
 
We do not believe that investors should try to predict future market movements. But others do. Here is a compilation by The Pragmatic Capitalist .
 
How is our site doing?
 
2009 was a good year for our site. It not only survived (not an easy task, since it requires considerable work), but the number of registered users increased by one third. We gave several conferences, and our website has been very visible in the media. Thank’s to all our readers. And if you have any suggestions for topics to be addressed in 2010, or suggestions on how to ensure the financial survival of the site in the long term, they are welcome.