A new study finds that investors can’t count on experience.

Gary Porter is associate professor of finance at John Carroll University and coauthor, with Bryant University’s Jack Trifts, of a study of mutual fund managers.

KIPLINGER: Like many others, you claim that it’s nearly impossible for fund managers to beat the market over time. What’s different about your study?

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PORTER: We looked at how managers do relative to their peers. You can always find the best manager for the past year or the past five years, but no one’s done a study of all the managers out there—even the retired ones. We focused on solo managers with track records of at least ten years. And we name names.

What did you find? Most people think that the longer you do something, the better you get. But we found that the longer the tenure of the manager, the poorer the performance.

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Why is that? Increased competition is one possibility. Most of these managers’ careers coincide with an increase in the number of funds. A second reason is that as funds get bigger, it becomes more difficult to find good opportunities. The third reason: When managers do very well, it’s by chance. Fund managers live in a world where market dynamics change. After the third year, fewer than half of the managers we studied did better in subsequent years.

But a handful of managers, such as Fidelity’s Peter Lynch, do come out ahead. What accounts for the best managers’ success? They have tremendous research support, they understand the market very well, and they take advantage of opportunities. But because there are so few of them, we argue that their successes are basically a matter of good fortune. If hard work and good research produced phenomenal fund returns, Peter Lynch would be one of dozens, if not hundreds. If you exclude the records of the 50 best managers, the market-adjusted returns of the rest are negative. Even Lynch’s performance declined over time. By the time he left, he was barely beating the market.

What should fund investors do? Our advice is not to put a lot of money into actively managed funds, and if you do, to diversify among fund managers. We recommend index funds. And don’t overlook the fund-disclosure boilerplate: “Past performance is no indication of future results.”