Mutual Funds that Beat the Market for Over a Decade

NEW YORK (MainStreet) — Passive investing is all the rage now that retail investors are giving up on trying to beat The Street. But the move away from trading and actively managed funds doesn't mean all funds are trailing the market. In fact, several are still beating the S&P 500 on a long-term time horizon, and some financial advisors are urging their customers to develop a more active investment strategy.

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2013 was a great year for passive investors in the stock market. While the Hedge Fund Equity Hedge Index saw 11.14% gains in 2013, the S&P 500 returned more than 30% to investors, urging many Bogleheads to crow that active management is dead and indexing is king.

More crucially, the massive underperformance of active investors has led a number of people to pull money from active money managers, both in hedge funds and in the retail mutual fund world. At the same time, low-cost, passive-managed ETFs have seen capital inflows reach all-time high levels.

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This doesn't mean that all mutual funds are losers, especially considering a longer-term time horizon. For instance, the Gabelli Asset Fund Class AAA mutual fund (GABAX) has returned 10.42% annualized over the past decade, compared to 8.4% for the S&P 500. Even the biggest proponent of passive investing is beating the market with an active fund: Vanguard, whose founder John Bogle is famous for beginning the passive investing revolution, offers a mutual fund that has beaten the S&P 500 over the past decade. Vanguard's Admiral Shares (VTSAX) is up 8.6% annualized over the last 10 years, and its alpha has grown considerably since the middle of 2010.