The first time I tried to compare the Fidelity Magellan Fund to the S&P 500, I stared at a table of returns on Morningstar, feeling like I was supposed to “get it”, but something didn’t add up. The numbers looked close, but the headlines I’d seen were all over the map: “Magellan beats the index!” then “Magellan lags behind!” It was only after missing subtle clues about fees and changes in management that I realized how easily our brains can focus on what we want to see.
Let’s clear the fog. When you’re comparing Magellan (FMAGX) to an S&P 500 fund, it isn’t just about who posted the hottest number last year. It’s about patterns over time, costs, and how small details can quietly shape your future results.
Common Pitfall: Chasing Last Year’s Winner
Most people, including me, have fallen for recency bias at some point. I remember watching Magellan post a stellar year and thinking maybe now was its comeback moment. But it’s easy to give too much weight to what just happened and forget what’s typical.
If you’re tempted by one big year, pause. What matters most is not who won last year, but which fund quietly wins again and again across many years.
Actual Returns: Magellan vs. S&P 500 (as of early 2024)
Here’s how the numbers stack up:
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Fidelity Magellan Fund (FMAGX)
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10-year average annual return: around 10%
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5-year average: about 13%
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2023: roughly 34%
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S&P 500 Total Return
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10-year average annual return: near 12%
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5-year average: about 15%
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2023: about 26%
So yes, Magellan had a great year in 2023, but over a decade, the S&P outpaced it by roughly two percentage points per year. That gap might sound small, but over ten years it adds up fast.
How Fees Quietly Make a Huge Difference
Let me give you a concrete example (a composite from several friends’ experiences):
Suppose you invested $10,000 in both funds at the start of 2014 and let them ride for ten years:
- Your Magellan account would have grown to about $25,900.
- The S&P index fund would be worth around $31,100.
What happened? Part is performance, but part is fees. Magellan charges about 0.77% per year in expenses; many S&P index funds are under 0.05%. That difference chips away at your gains every single year.
Why Active Managers Rarely Stay Ahead, And Why We Think They Do
Active funds like Magellan hire smart people trying to outperform the market by picking stocks or shifting strategies. Sometimes they win big in one year or another. But after expenses and taxes, most don’t keep up with low-cost index funds over long stretches.
It’s tempting to believe that a hot streak signals skill that will continue. But more often than not, those top years revert back toward average, or worse. Investors often jump in after a great run, only to catch an ordinary stretch or even underperformance.
Traps That Cost Investors Money
Here are some common mistakes I’ve seen (and made):
- Performance-chasing
Buying last year’s winner usually means missing next year’s leader. - Ignoring fees
A higher expense ratio may seem minor until you see how much it drags down growth after compounding for years. - Missing manager changes
When leadership shifts, as has happened with Magellan, the new manager may bring a very different approach (and results). - Style drift
Active funds sometimes shift their strategy without notice, suddenly owning more tech or value stocks than expected, which may not match your original goal.
If any of these sound familiar from your own experience or conversations with friends, know you aren’t alone.
Smarter Ways to Compare Funds
If you want a fair comparison:
- Look at total returns including dividends (not just price change).
- Use rolling periods, for example, compare every five-year stretch over the past decade instead of hand-picking endpoints.
- Subtract expense ratios from each fund before comparing growth.
- Check if the fund has changed managers recently.
- See if its investments match your expectations or if they’ve shifted into new sectors or styles.
A practical tip: Most brokerages or sites like Morningstar let you chart two funds side by side for different time periods and show expense ratios clearly.
When Does Magellan Make Sense?
For someone who wants something different from pure market exposure, a different sector mix some years, or confidence in a particular manager’s strategy, Magellan could play a role as part of your portfolio. But go in with eyes open: know what makes this fund unique and accept that it may lag an index for long stretches.
On the other hand, if you just want low-cost access to U.S. stock market growth with minimal fuss and steady compounding over decades? The data says an S&P index fund is hard to beat for consistency and simplicity right now.
Next Steps: Walk Through This Before You Decide
Before sticking with, or switching into, any fund:
- Pull up both its most recent returns page and that of a top low-fee S&P index fund.
- Compare not just last year but each five- and ten-year period shown.
- Note each expense ratio.
- Look up when the current manager started.
- Ask yourself which pattern feels steady enough for your goals, and which surprises could derail your plan if things change suddenly.
Seeing those numbers side by side makes decisions clearer, and could mean thousands more in your pocket down the road.
If this feels overwhelming or brings up more questions than answers, that’s normal! Many investors find clarity only after looking beyond headlines and anchoring their choices in long-term patterns rather than stories of quick wins.
Your future self will thank you for doing this homework today before inertia locks in old habits. And if you want help interpreting side-by-side charts or understanding fee impact deeper, don’t hesitate to ask someone who’s been through this comparison recently, they’ll likely have their own story of learning things the hard way.