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Two Index Fund Studies Remind Us of One Good Strategy

Index fund investors let the facts speak for themselves. The long-term data comparing active funds to index funds shows actively managed mutual funds underperform in all asset classes and all investment styles. There is no ambiguity in the results, and there’s nothing new to report here. The data has been saying the same thing for decades.

But, we’re only human. We forget, and lies are constantly being told that cause us to second-guess our resolve. It’s a good idea to revisit the data at least once a year just to remind ourselves why we believe what we believe: that we should continue to invest in index funds rather than active management.

I recommend two studies published annually to keep index fund investors on the straight and narrow. They are Vanguard’s The case for index-fund investing and S&P Dow Jones Indices’ year-end SPIVA® U.S. Scorecard. Both reports have been recently updated through year-end 2014, and together they’ll give you all the data needed to reconfirm that you’re doing the right thing by investing in index funds.

Vanguard’s Case

The case for index fund investing is a well-written, well-illustrated look at active versus passive investing, and it will only take about 30 minutes to read. Overall, it offers a detailed look at the theory behind indexing and includes comprehensive supporting data.

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