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Faith in Index Funds Rests on Flawed Research

Is it a mistake to buy the PIMCO fund? Not necessarily. Gross has surpassed the benchmark over a career that spans decades, and he deserves his star reputation. But many investors who chose the actively managed bond funds were acting out of panic, not rational thought.

The timing of many investors was terrible. Since markets hit their low in March 2009, actively managed stock funds have soared. Many active funds that suffered big withdrawals have outpaced bonds and stock index funds by comfortable margins. Instead of panicking, investors should have acted carefully, buying sensible funds and holding for the long term.
Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
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