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Myth #3: Index funds never underperform.
They couldn’t be more wrong!
Index funds have costs. Even a fund that replicates an index exactly will only give you the index’s return MINUS the fund’s costs. Because of costs, index funds will always underperform, and they will never outperform.
Vanguard may be the best indexer in the world, and once in a while they diverge from their benchmarks to make up for their expense ratios. But in the end they still underperform.
If an index fund were to outperform its index, then, well, it wouldn’t be an index fund.
Why Index Funds Are NOT the Best Answer
Article printed from InvestorPlace Media, http://www.investorplace.com/2008/04/mutual-fund-indexing-active-management/.
©2012 InvestorPlace Media, LLC
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