Re: Why Mutual Funds are better than Index Funds
The S&P 500 Index is so top heavy. I don't know the exact figures, but I seem to recall something in the neighborhood of 80% of the index return is dictated by the performance of less than 20% of its holdings.
S&P 500 index funds have underperformed over the past few years because of the lackluster performance of the HUGE stocks out there (Pfizer, AIG, MSFT, WMT, etc.)
In reality, the S&P 500 is not really all that diversified. And contrary to what many feel, index funds are actively managed (who do you think decides on which stocks make the list?).
If you are looking for a Large (mega)cap fund, it's decent, but if you want a diversified portfolio the S&P 500 fund is hardly enough.
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