Why Mutual Funds are better than Index Funds

[Peter666]

As I live in Canada, I will give a Canadian example. Our equivalent of the S&P 500 is the Toronto Stock Exchange and S&P composite. Over the last ten years, this composite index has made roughly 9% interest with the worst single calendar year (2002) being at about -14%. A great mutual fund run by Kim Shannon over 10 years has produced roughly 14% interest on average after expenses, with the worst single calendar year (2002) being at 0%.

You can take any type of index fund for any investment style and find at least a couple of superior mutual funds.

For American investing, I like to compare the 40 plus years performance of Berkshire Hathaway to the S&P 500.

An index is simply just that: an index of the average performance of stocks on an exchange for a given period of time. It is a valuable tool in judging the performance of mutual funds and stocks, but I do not know why anybody would invest in an index when there are talented managers providing both less fluctuation and superior return in their mutual funds.