NEW YORK ( TheStreet) -- Some proponents of index funds have been making extravagant claims. Index funds always outperform actively managed funds, the proponents say. Plenty of investors have been persuaded, and they are pouring money into index mutual funds and ETFs.But in the past decade, many index funds have produced dismal results, lagging their category averages. Dozens of index funds have been liquidated or merged away. In a new study, Morningstar tracked the performance of index funds. In January 2001, there were 542 index funds. Over the next 10 years, only 25% surpassed their category averages. Of the rest, 30% went out of business and the others failed to outdo their category averages.
Faith in Index Funds Rests on Flawed Research
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