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Author: TMFMax Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 25240  
Subject: Re: index .vs high risk Date: 3/8/1999 3:37 PM
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<<Index funds have a place in any portfolio, but I also believe that there's room for
international funds, small cap funds, and other funds that have a far higher level
of risk, and a far higher reward potential as well.

I personally think that everyone that's more than ten years away from retirement
should weight their funds towards higher rewarding investments, even if there's
more risk involved.>>

There may be confusion about what "index funds" are. Index funds aren't just for tracking the S&P 500 -- there are index funds to track any sector of the market you'd like -- and the more narrowly you define a sector (and therefore perhaps the "riskier" it is), the higher the degree to which index funds outperform managed funds that invest in that same sector.

Here's a link showing the math for index funds in the small cap sector and the international sector. If you're going to be buying a mutual fund for either of those sectors (not a terrible idea at all), the odds are very heavily against your picking a managed fund which is better than the index fund for such a sector. http://www.vanguard.com/educ/lib/bogle/rattle.html

Best,

Bill

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