I started investing recently, but I've been searching for information for over a year now. My main sources (listed below) favour the strategy of Jack Bogle. i.e. Choosing an index fund with good diversification and low TER and watch it grow (buy&hold).

There seems to be great consensus among them, supported by historical and recent data that points that actively managed funds offer no advantages against the indexed ones.

If actively managed mutual funds fail to consistently beat the market, why should an individual investor bother with them? They offer a dubious hope of higher returns, with the omnipresent downside of higher Total Expense Ratio.

My question is:

Why other investing strategies (cherry-picking stocks, mutual funds, etc) haven't been phased out in favour of index investing yet?


Mr.Money Moustache


Jim Collins

  • 1
    Good question. Especially in 401(k)s with limited investing options an index fund is a no-brainer. If your 401(k) doesn't offer an index fund, talk to your plan administrator about adding one.
    – zanussi
    Apr 16, 2015 at 15:31
  • The linked question solves this duplicate one. Apr 16, 2015 at 16:54

2 Answers 2


Because nobody can earn fat bonuses by making people invest that way.


You might find this article informative as it presents two sides, one pro-index and pro-active funds.

As for your question:

Why other investing strategies (cherry-picking stocks, mutual funds, etc) haven't been phased out in favour of index investing yet?

If you're asking about the fact that active funds exist, some investors prefer them (like me). If you're asking about why companies don't use index funds over active funds in a 401k, that's relative to the company's choice as well as what employees prefer - if employees aren't saying much, they probably won't change (make some noise with other employees). If you're asking about why media don't sell index funds more than actively managed funds, most media, like the WSJ, Get Rich Slowly, Simple Dollar, New York Times, etc do.

Based on your English, it doesn't seem like you're an American so as for why a culture might allow active funds to exist, generally we prefer freedom to choose, so we don't tyrannically state one MUST do something (we "advise"). So people can choose whichever fund they prefer.

  • 5
    The question isn't asking why actively-managed funds haven't been legislated out of existence. It's asking why they haven't been market-competed out of existence. You say you prefer them, but you don't answer the central question asked here, which is why you (or anyone else) would prefer them.
    – BrenBarn
    Apr 16, 2015 at 19:08

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