Investors who prefer to choose the best S&P 500 Index funds over the attempt to beat the market with actively managed funds are reflecting on a victory for 2011. The previous year was no cake walk for the average investor but the professional money manager was not able to beat the S&P 500.
Indexing: A Practice in Humility and Investing Success
A passive approach (i.e. Index investing) in 2011 vastly outperformed actively-managed funds. The S&P 500, including dividends, was up 2.11% in 2011 while the average large blend category fund gained just 0.02%. Index funds don't beat fund managers every year but there is certainly enough historical data to show that most fund managers do not outperform the broad market indexes on a consistent or long-term basis.
The whole idea of using index funds can be found in the adage, "if you can't beat 'em, join 'em." This is what John Bogle had in mind when he started Vanguard more than 35 years ago. Mr. Bogle also probably realized that all of his knowledge and experience (and that of his contemporaries) was not enough to consistently beat the market averages. Research takes time and costs money. Also the very idea of beating the market is an example of blind ego.
Of course there are those who can outperform the market averages from time to time. However the combination of simplicity and low cost, primary aspects of the best S&P 500 Index Funds, are difficult to beat. In addition, who wants to spend all that time and money on research and trading?