Americans Lose Faith in Stock Pickers

Investors are showing increasing disenchantment with money managers who pick U.S. stocks. Mutual funds that invest in domestic equities have lost an estimated $8 billion to redemptions this year through June 29, putting them on track for an unprecedented five straight years of withdrawals, according to data from the Investment Company Institute. Over the 10 years through May 31, investors withdrew $51 billion more from domestic equity funds than they deposited.

Index funds that invest in U.S. stocks had positive inflows every year since 2001, according to research firm Morningstar, which means that the withdrawals have been coming mostly from actively managed funds—those where a manager chooses individual stocks. The two bear markets since the start of the century have helped discredit the idea that active money managers can beat the market consistently over time. “Actively managed domestic stock funds haven’t demonstrated that they can add value,” says Geoff Bobroff, an investment management consultant based in East Greenwich, R.I. “They have lost their mojo.”