Navigator: The Wisdom of Bean Counters


At a recent conference, our firm used a “guess-the-number-of-jellybeans-in-the-jar” contest to boost traffic at our booth. The results of the contest were thought provoking, and a valuable lesson about guessing the direction of the stock market.

There were 3,745 jellybeans in the jar. But the guesses were all over the map. They ranged from a low of 274 to a high of 9,779.

The average guess was 3,208, which was far better than most individual guesses. Only 4 guesses were closer than the average. A full 88% of the guesses were worse than the average.

Investors don’t do any better when they try to guess the direction of the stock market.

A recent study by Standard & Poor’s calculated the percentage of all domestic equity funds that underperformed a broad market index (S&P Composite 1500) for various time periods through the end of 2022. As you can see, the funds performed very poorly.

Percentage of U.S. Equity Funds Underperforming Their Benchmarks
Year-End 2022

Sources: S&P Dow Jones Indices LLC, CRSP . Broad Index: S&P Composite 1500. Based on Absolute Return. Data as of Dec. 31, 2022. Past performance is no guarantee of future results. Table is provided for illustrative purposes.

These are professional money managers and most of them could not outperform a simple broad-market index. They were unable to consistently predict the direction of the stock market.

A 2016 article by Wim Antoons studied the predictions of 68 market timing gurus between 1999 and 2012. Forty-two of the 68 gurus (61.8%) were accurate less than 50% of the time.

Antoon studied the data for the period 2005 through 2012—a total of 6,582 forecasts—and found that “after transaction costs, no single market timer was able to make money.”

These results led Antoon to conclude: “There are two kinds of investors: those who don’t know where the market is going and those who don’t know what they don’t know.”

Many other studies cited in the Antoons article support this view.

A recent study by Dalbar, Inc. found that from 1993 through 2022, the average equity fund investor generated an annualized return of 6.81% when the S&P 500 Index returned 9.65%.

As you can see from the graphic below, the average equity fund investor’s return over that period was less than half of the return of the index.

Average Equity Fund Investor vs. Indexes Over 30 Years

Source: Dalbar QAIB 2023 study, Morningstar, Inc. Past performance does not guarantee future results. The S&P 500 Index is an unmanaged float-adjust market capitalization-weighted index that is generally considered representative of the U.S. stock market. Other indexes may be more appropriate to benchmark your investments against. It is not possible to invest directly in an index. Data is provided for illustrative purposes only, it does not represent actual performance of any client portfolio or account and it should not be interpreted as an indication of such performance.


Dalbar has been studying the behavior of mutual fund investors for 25 years. Every year the results are the same. Dalbar attributes the gap between the performance of the average fund investor and the index to inaccurate guesses by investors about the direction of the market.

Investors, whether they are individuals or professionals, are no better at predicting the direction of the stock market than they are at guessing the number of jellybeans in a jar.



The information contained herein does not constitute investment advice or a solicitation.  This article is for dissemination of general information only. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.  Investments are not guaranteed and are subject to investment risk, including possible loss of the principal amount invested. Past performance is no guarantee of future results.




Discover how GeoWealth can transform your practice.