I completely disagree with you on this.

The only way your argument holds water is if you posit that investment results vs. index for actively managed funds are completely random. I think it’s fairly easy to disprove such a precept.

If you look at the results of actively managed funds vs. their index, corrected for the level of risk they take on, you can identify those that are more likely (not guaranteed, certainly, but more likely) to outperform in the future.

Things like long manager tenure, good long-term results vs. risk, low fees, good governance, and relatively low investment turnover can help identify funds that are more likely than others to be in the 10% — 20% that outperform the index.

That’s how I picked out Capital Appreciation more than 15 years ago. It’s how I picked out the other funds I’ve invested in over time. That’s the reason that my personal rate of return has outpaced the S&P 500 by an annualized 1.9% since 2003, and I’ve never invested in a single index fund.

Does this guarantee that my portfolio will outperform the market this year? Of course not. In any given year, any of the funds I’m invested in (or all of them) could underperform the market.

However, if you come up with a strategy that’s based on a systematic approach to assessing fund performance vs. risk; and stick with that strategy over the long term, it is possible to identify funds that on average and over the long term will likely outperform the market.

One could try to expand this argument to individual stocks, but that’s where I draw my personal line. I have no presumption to the level of expertise, time, or analyst support that are available to top fund managers. That’s why I invest almost entirely through funds. I don’t need to beat their performance if I can pick those of them who will outperform in the long run :).