Re: Why Mutual Funds are better than Index Funds
How much money does Berkshire Hathaway hold in indexes? If Warren Buffet puts his money where his mouth is, then there is good reason to invest there. But the smart investor will follow his actions before acting on his advice.
Also, nobody said that Berkshire Hathaway is a mutual fund, and if you follow the link provided before, you will see a number of mutual funds trouncing the index thanks to the talent of one manager. The talented managers also realize the inherent weaknesses of a mutual fund, and take that into consideration in their plans. They are not incompetent.
So the bottom line is: follow the example of the proven managers. Invest like they do. But if you don't have the time or the inclination to do that, then pay them to invest your money for you. Do this so long as the net return after fees does better than the index over a reasonable period of time, or at least gives you peace of mind due to less fluctuation.
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