Why Index Funds Are NOT the Best Answer

Myth #5: Index funds are cheap.

However, low costs benefit active fund shareholders as well. You just have to pick low-cost funds.

Just like with tax efficiency, what matters isn’t necessarily which fund has the lowest expense ratio, but how much money you end up with. 

For example, Vanguard Capital Opportunity may cost more than Vanguard 500 Index , but it has more than earned its fee. Since inception, Capital Opportunity has doubled the index’s return — a pretty good trick for an actively managed fund

Click here for a quick 10-step plan for a profitable 2009.

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