Note that the average fund substantially lagged the overall stock market averages. Most funds are actively managed by professionals trying to beat the market. By contrast, low-cost broad index funds, which simply seek to mirror the markets, generally did their job well.
For example, the Vanguard Total Stock Market Index Fund returned 12.3 percent for the quarter and 26.1 percent for the year, outperforming the average fund and the S&P 500. So, in a nutshell, I think It's best for most people to use low-cost index funds.
Most global markets also fared well in 2023, and as usual, the average fund lagged market returns. For example, a major global benchmark, the MSCI All Country World Index (often known as ACWI), returned more than 21 percent in 2023. The average international fund in Morningstar's database returned just a 14.3 percent.
Of course, some individual stocks did much better than average. Nvidia, which makes advanced computer chips, rose 239 percent in 2023. Meta, Facebook's parent company, gained 194 percent, after falling 64 percent the previous year due to investor skepticism about Nvidia's approach. the company, at that time, in the so-called metaverse. However, in 2023, these big tech stocks benefited from the AI frenzy and lifted the S&P 500. Perhaps most surprisingly, cruise lines are also up: Royal Caribbean soared 162 percent and Carnival rose 130 percent. percent. If you had focused on any of these stocks in early 2023, you would have come out a winner.
On the other hand, most stocks underperformed the averages. Dollar General, Moderna and Estée Lauder, all major S&P 500 stocks, lost more than 40 percent in 2023.
