What is an index fund, and why do experts keep recommending it?
An index fund holds every stock in a market index, all 500 companies of the S&P 500, say, in proportion, with no manager picking winners. That passivity is the feature: fees run near zero, often under 0.05 percent annually, versus roughly 1 percent for actively managed funds, and the fee gap compounds into six figures over a working life.
The uncomfortable evidence for the professionals is S&P's own SPIVA scorecard, which has shown year after year that around 90 percent of active US large-cap funds underperform the plain index over 15-year stretches, and the few winners rarely repeat. This is why Warren Buffett publicly directed his own estate into an S&P 500 index fund and won a famous ten-year bet against a hedge fund portfolio with one. Owning everything cheaply beats paying someone to guess.
A fund that buys the whole market instead of guessing winners. S&P scorecards show roughly 90 percent of professional stock pickers lose to the index over 15 years. Own the haystack, skip the needle hunt.
- SPIVA scorecards, S&P Dow Jones Indices
- Berkshire Hathaway shareholder letters
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https://frequentlyaskedquestions.us/q/what-is-an-index-fund/Everybody Asks. (2026, July 28). What is an index fund, and why do experts keep recommending it? https://frequentlyaskedquestions.us/q/what-is-an-index-fund/“What is an index fund, and why do experts keep recommending it?” Everybody Asks, 28 July 2026, https://frequentlyaskedquestions.us/q/what-is-an-index-fund/.“What is an index fund, and why do experts keep recommending it?” Everybody Asks. Last modified July 28, 2026. https://frequentlyaskedquestions.us/q/what-is-an-index-fund/.This page summarizes the primary sources listed above. For academic or encyclopedic work, cite those primary sources directly wherever possible.