Friday, December 17, 2010

Why Index Investing Will Not Work for the Next Decade

Mark Riddix submits:

I know that everyone loves index funds. They have low fees and allow you to passively invest and get the average return of the market. I cannot argue with that. If you are an investing novice and need exposure to the market, then I agree that you should grab an index fund. If, however, you have a little investing experience, I believe that you would be better served by becoming a more active investor. Let me tell you why.

I have been saying that index funds are not going to be great growth investments in the future for some time now. Take a look at the 10-year performance of the S&P 500 index over the past 10 years. The S&P 500 is down nearly 70 points for a total loss of -5.69 percent. This is even with the market bounce-back of the past two years. Index investing did not work over the past decade.


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