The world has changed–a lot.

A friend of mine is a school psychologist. He says many teenaged boys are addicted to online porn. Philip Zimbardo agrees. He’s a psychologist and professor emeritus at Stanford University. He’s also the author of Man Interrupted: Why Young Men Are Struggling And What We Can Do About It.

Zimbardo says online porn is a serious problem. It sets crazy expectations for teenage boys. They begin to think that perfect bodies, handcuffs, whips, and serial promiscuity are all pretty normal. According to the author, this makes it tough for teenaged boys to develop healthy relationships.

Every year, Kiplinger’s publishes their favorite mutual funds. It’s a lot like online porn. Nine years ago, the magazine published The 25 Best Mutual Funds—2008. Let’s have a look at the damage it might have caused.

When that story was published, all of these funds had great track records. One of them was the Marsico 21st Century Fund (MXXIX). In the previous five years, it beat the S&P 500 by 10 percent per year.

The teenage boy equivalent is a big busted woman…in stilletos…with a whip. She’s saying, “Come and get it boy.” Unless they’re paying for it, that ain’t likely going to happen. Picking actively managed funds that you expect to beat the market is just as foolish.

None of Kiplinger’s picks were low-cost index funds. That’s a whole lot of crazy.

The SPIVA Scorecard shows that index funds beat about 82 percent of actively managed funds over ten years or longer. The SPIVA Persistence Scorecard shows that winning mutual funds during one time period rarely win the next. That’s why it’s smarter to invest with low-cost index funds.

Despite its track record, Marsisco’s 21st Century Fund let investors down from January 2008 until March 31, 2017. It gained a compound annual return of just 3.35 percent per year. Vanguard’s Total Stock Market Index (VTSMX) gained 7.74 percent per year.

But there’s something much darker that hides below the surface. When an investor picks a fund because it rocked in the past, they expect it to keep rocking. When the fund does well, confidence grows. The investor adds more money. But after it slumps or slides, they sell or stop buying. This ensures that they pay an above-average price over time.

Morningstar measures how a fund performs. It also reports how fund investors do. In April 2016, Morningstar’s Ben Johnson published, Mind The Gap: Active Versus Passive Edition.

Morningstar found that investors in actively managed funds have twitchy feet. They jump around a lot. If their funds are disappointing, they sell. Sadly, the fund they sell often rises once again…after they have sold it. After the fund has done well, investors often buy it. The fund they buy often starts to slump…after they have bought it. Over time, the average investor pays an above average price.

Morningstar says the typical investor in actively managed funds underperformed their funds by 0.79 percent annually over the ten-year period that ended December 31, 2015. In contrast, most index funds investors don’t dance around. Many add equal sums to their investments every month.

Sometimes, this helps index fund investors pay below-average prices. In the same Morningstar study index fund investors outperformed their funds by 2.57 percent per year from December 31, 2005 to December 31, 2015.

The performance gap–between how an actively managed fund performs and how its investors perform–might be even greater if it’s shown in a magazine.

The Marsisco 21st Century Fund is a tragic example. It gained a compound annual return of just 3.35 percent per year from January 2008 to March 31, 2017. But according to Morningstar, the typical investor in Marsisco’s 21st Century Fund underperformed their fund by about 7.65 percent per year over that same time period. That means they lost about 4.3 percent per year.

In contrast, investors in Vanguard’s Total Stock Market Index gained a compound annual return of 8.56 percent. They enjoyed a much better courtship. They outperformed their fund by 0.91 percent per year.

How Did The Average Investor Perform?
January 2008 – March 31, 2017

Fund Sum Invested Average Investor’s End Value
Marsisco’s 21st Century Fund $10,000 $6,659
Vanguard’s Total Stock Market Index (VTSMX) $10,000 $21,376

Source: Morningstar.com; using fund performance data coupled with approximate investors’ returns

Each of Kiplinger’s other listed funds had strong past performances. But the past and the future don’t go hand-in-hand.

Using Morningstar, I tracked how Kiplinger’s 25 actively managed funds had performed since their story’s 2008 publication. Three of the funds no longer exist. But the remaining funds gained an average compound return of 5.29 percent per year. A portfolio divided equally into the 22 remaining funds would have included 20 percent bonds, 12 percent international stocks and 68 percent U.S. stocks. A similarly allocated portfolio of index funds stomped them. It would have averaged a compound annual return of 6.52 percent.

But it gets even worse for Kiplinger’s readers. According to Morningstar, investors in these funds averaged a compound return of about 3.22 percent per year. They underperformed their funds by about 2.07 percent per year.

Morningstar’s data shows that the average investor who built a similarly allocated portfolio of low-cost index funds would have averaged a compound annual return of 7.24 percent. They would have outperformed their funds by 0.72 percent per year.

The pornographic promise of Kiplinger’s funds cost investors 4.02 percent per year (when coupling poor fund performance with silly investment behavior).

Let’s project the damage of that broad performance gap.

Assume an investor adds $5000 a year to an IRA. After 35 years, investors following Kiplinger’s advice might have an estimated portfolio value of $325,694. With a portfolio of low-cost index funds, they would have more than twice as much: $781,156. Shame on you, Kiplinger’s, for promoting the equivalent of online porn.

$5000 Invested Annually

Estimated End Value Kiplinger’s Funds Low-Cost Index Funds
3.22% Per Year 7.24% Per year
After 35 Years $325,694 $781,156
After 40 Years $409,139 $1,139,938

For Further Reading About The Futility Of Picking Actively Managed Funds

Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and The">http://www.amazon.com/The-Global-Expatriates-Guide... Global Expatriate's Guide to Investing: From Millionaire Teacher to Millionaire Expat.