Your Fund Could Prosper Without a Manager

Low fees and simplicity are common selling points for index funds. But they also outperform many mutual funds and hedge funds after taxes and fees are deducted, a new study says.

Mark Kritzman, chief executive officer of Windham Capital Management, calculated the average returns of three imaginary funds over a hypothetical 20-year period. Including fees and estimated taxes, index funds returned 8.5% a year on average, compared with 8% for actively managed mutual funds and 7.7% for hedge funds.

Financial experts continue to debate over which investing method yields the biggest returns long-term. Funds that are actively managed rely on stock picking and asset allocation strategies to maximize returns. Index funds, on the other hand, are designed to track a market index with the help of computer models. ...