[doreenjoy]

Thanks to the OP for posting the link. If I wasn't already a firm believer in the wisdom of index funds, I would have downloaded it.

And to address some points made above, at the risk of sounding pedantic --

Actually, "low cost" does not solely refer to the load or commission of purchasing a fund. Low cost also refers to the cost of managing the fund. Index funds have a wafer-thin management cost of 0.02%, while even the cheaper managed funds cost over 1%. That means that every year, you are charged 0.08% more (at least) simply for the dubious priviledge of being in the managed funds.

While it's true that some managed funds do beat the performance of an index in the short term, no one knows what those winning funds are in advance. Studies have shown that between 60% and 70% of managed funds will NOT outperform their respective index funds. If you're very lucky, you can beat an index. Even Peter Lynch could not keep the Magellan fund consistently above the index.

Also, over time *all* funds will revert to the mean (the mean being the index's performance). So if you have a long investment time horizon, you can't beat the performance of an index fund, and you won't have to lose sleep over it.