Dave L, I concede that someone who is willing to put in the time and effort, they may become good at selecting stocks. Then again, they may not: I have friends who have spent a lot of time and effort studying individual stocks without much to show for it. And don’t even get me started on the financial press that’s there to distract and mislead investors into bad choices–yikes!
In short, I believe that a passive index fund will outperform a majority of professional active money managers, and it’s the best choice for the vast majority of people.
Furthermore, who would most people name as the greatest investor of the last 50 years? Probably Warren Buffett. Well, guess how Warren Buffett wants his money left to his wife when he dies? Buffett wants the money in an index fund (!). Here’s the article: http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/24/w... and I’ll just quote a bit:
"My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund. (I suggest Vanguard’s.) I believe the trust’s long-term results from this policy will be superior to those attained by most investors — whether pension funds, institutions, or individuals — who employ high-fee managers."
So you have to ask yourself: are you smarter than Warren Buffett? Because Buffett is counting on an index fund when he dies.