Another case for indexing

I've mentioned in the past that the best strategy for investing for the long haul is to hold low-cost broad index mutual funds such as the Vanguard Total Stock Market Index Fund or the Vanguard S&P 500 Index Fund. Schwab, Fidelity and other investment houses offer similar products with low expense ratios (well under 10 basis points which equals 1/10 of 1% versus many active funds that charge more than 100 basis points or a full percent).

But another important reasons for holding such mutual funds is that they outperform actively-management funds over time. Sure, they'll be years when a top mutual fund will wildly beat the market. But not consistently and not without a retrenchment.

Case in point, according to Steven Russolillo of the Wall Street Journal, is the fact that for the 30 year period through 2015 active equity funds delivered an average annual return of just 3.7%. The S&P 500 index generated an average annual return of 10.4%! Wow! All those great brains running those big (and profitable to the investment managers) and yet the "dumb" passive index whomped them! Take note and take action!